For most families around the world, owning their first home is the biggest financial decision, ever. For that, the primary funding option is a home loan, the backbone of the residential real estate industry.

But so many Indian taxpayers availing home loans are unaware of the interest deduction under Section 80EEA. This ₹1.5 Lakh deduction, complementing the standard Section 24(b) is designed to boost affordable housing and impact loan value and more for the homeowners.

Through this guide, we’ll shed some light on the Section 80EEA for deduction on interest on home loan. So anyone trying to get a home loan can avail the best info possible. Let’s begin.

What is Section 80EEA?

Section 80EEA of the Income Tax Act, 1961, provides an additional deduction of up to ₹1.5 lakh on the interest paid on home loans for first-time buyers of affordable housing. Introduced in 2019, this benefit is available over and above the standard ₹2 lakh deduction under Section 24(b).

Income Tax ActDeduction Amount
Section 24BRs.2L p.a. towards the interest component of the home loan repayment.
Section 80CRs 1.5L p.a. towards the principal component of the home loan repayment.
Section 80EEARs 1.5L p.a. towards the interest component of the home loan repayment.

Key Features of Section 80EEA Deduction

  • Eligibility: Only for first-time homebuyers.
  • Property Value Limit: The stamp duty value must not exceed ₹45 lakh.
  • Loan Sanction Period: The loan must be approved between April 1, 2019, and March 31, 2022 (extended to March 31, 2023 for certain cases).
  • Tax Benefit: Deduction of ₹1.5 lakh per financial year until the interest is fully claimed.

This provision aims to boost housing demands with affordable home loans while reducing the tax burden on middle-class homebuyers.

Eligibility for the Section 80EEA Housing Loan Interest Deduction

To claim the ₹1.5 lakh deduction under Section 80EEA, you must be a first-time homebuyer with a home loan sanctioned between April 1, 2019, and March 31, 2023, for an affordable residential property (stamp duty value ≤ ₹45 lakh). The loan must be from a financial institution, and you cannot own any other residential property at the time of loan sanction.

This deduction is in addition to the ₹2 lakh interest claim under Section 24(b). But the total deduction (including Section 80EEA) cannot exceed ₹3.5 lakh per financial year.

Conditions for Interest Deduction Under Section 80EEA

When considering the interest deduction under Section 80EEA, it’s crucial to understand the specific conditions that must be met. Here’s a concise breakdown:

  • Individual Taxpayer: The deduction is exclusively for individual taxpayers.
  • First-time Homebuyer Status: The individual must be a first-time homebuyer, meaning they should not own any other residential property at the time of loan sanction.
  • Loan Sanction Period: The home loan must have been sanctioned between April 1, 2019, and March 31, 2022.
  • Property Value Limit: The stamp duty value of the residential property must not exceed ₹45 lakh.
  • Loan Source: The loan must be obtained from a financial institution or a housing finance company, like Nihal Fintech.
  • Exclusion of Section 80EE: The taxpayer cannot claim deductions under both Section 80EE and Section 80EEA.

Besides these conditions, there are limitations on the carpet area of the property, with different thresholds for metropolitan and non-metropolitan cities.

For metropolitan cities, the carpet area shouldn’t exceed 60 square meters. And for other cities, the carpet area shouldn’t exceed 90 square meters.

How to Apply for the Section 80EEA Housing Loan Interest Deduction?

To avail the ₹1.5 lakh tax benefit under Section 80EEA, follow these steps:

  1. Check Eligibility: Ensure you meet all criteria (first-time homebuyer, loan sanctioned between April 2019–March 2023, property value ≤ ₹45 lakh).
  2. Obtain a Home Loan Interest Certificate: Your lender must provide this, detailing the interest paid during the financial year.
  3. File ITR with Correct Details: While filing your Income Tax Return (ITR), report the deduction under “Deductions u/s 80EEA” in the relevant section (usually ITR-1 or ITR-2).
  4. Keep Supporting Documents: Retain the loan agreement, property papers, and interest certificates in case of scrutiny.

It’s important to note that you don’t need a separate form for the Section 80EEA deduction. The claim is made directly while filing the income tax returns.

How is the Section 80EEA Deduction Calculated?

The deduction is based on the actual amount of interest you pay on your home loan during a given financial year. The maximum deduction you can claim under Section 80EEA is ₹1.5 lakh per financial year.

The actual deduction amount will be the lower of:

  • The total interest you paid on the home loan.
  • ₹1.5 lakh.

This deduction is separate from the standard ₹2 lakh limit under Section 24(b). Here’s how it works:

Step 1: Calculate total home loan interest paid during the financial year.

Step 2: First, claim ₹2 lakh under Section 24(b) (standard deduction for any home loan).

Step 3: Let’s say your property qualifies under 80EEA (value ≤ ₹45 lakh, first-time buyer, loan sanctioned between 2019–2023). Then you can claim an extra ₹1.5 lakh on the remaining interest.

Step 4: The combined deduction (Section 24(b) + 80EEA) cannot exceed ₹3.5 lakh in a year.

Let’s take an example.

You have bought your first home with a housing loan and paid an interest of ₹3.2 lakh. Then you are, of course eligible for the Section 24(b) claim of ₹2 lakh, along with the remaining interest to be claimed under Section 80EEA, i.e. ₹1.2 lakh.

So the total deduction comes out to be ₹3.2 lakh (₹2L + ₹1.2L).

FAQs on Section 80EEA Deduction

  1. Who can claim the Section 80EEA deduction?

    First-time homebuyers with a home loan sanctioned between April 1, 2019, and March 31, 2023, for an affordable house (stamp duty value ≤ ₹45 lakh). You must not own any other residential property at the time of loan approval.

  2. What is the maximum deduction allowed under Section 80EEA?

    The max deduction is ₹1.5 lakh per financial year on home loan interest, in addition to the ₹2 lakh limit under Section 24(b). The combined cap is ₹3.5 lakh.

  3. Is this Section 80EEA deduction in addition to Section 24(b)?

    Yes. You can claim both:
    – ₹2 lakh under Section 24(b) (standard home loan interest deduction).
    – ₹1.5 lakh under Section 80EEA (extra benefit for affordable housing).

  4. Can I claim Section 80EEA deduction if I already own another property?

    No, the Section 80EEA deduction is exclusively for first-time homebuyers. If you already own another residential property at the time of loan sanction, you are not eligible.

  5. Are there any carpet area limitations?

    Yes. The property must comply with affordable housing size norms. The carpet area should be less than 60 sq. meters (carpet area) for metro cities (Delhi, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad). The area should be less than 90 sq. meters for non-metro areas.

  6. Can I claim deductions under both Section 80EE and 80EEA?

    No. Section 80EE (for loans up to ₹35 lakh) and Section 80EEA cannot be claimed together for the same property. Choose the one that offers higher benefits.

Final Summary

Section 80EEA offers a valuable opportunity for first-time homebuyers to reduce their tax burden while investing in affordable housing. It offers an additional ₹1.5 lakh deduction over the standard Section 24(b) benefit. That means significantly lower taxable income.

Before claiming the deduction, ensure your property qualifies in terms of value, carpet area, and loan sanction period. Keep all necessary documents, such as your loan interest certificate and property papers, handy for a smooth tax filing process.

If you’re planning to buy your first home, avail for the best home loan with Nihal Fintech and leverage Section 80EEA deduction. And for more info on the home loans, interest, and deductions, connect with our experts today!