Although the year 2020 has given us a tough time, it may be the best time to invest on the property you wished for since long. Easy home loan facilities gets a cherry on the top of the cake with the tax benefit increased up to Rs 3.5 Lakhs in July 2019 budget. Additional benefit for first time home buyers have also been given as per the policy. This scheme, the deadline to avail which was March 31, 2020, has now been extended to March 31, 2021, by Finance Minister, Nirmala Sitharaman in her Budget 2020 speech.
The total interest amount payable on a housing loan, can be claimed as a deduction from one?s total Gross Income as per the income tax laws. One can claim a maximum of Rs 3.5 Lakhs as deduction amount allowed FY 2019-20 onward for those purchasing residential property under the affordable housing scheme. As a part of the ?Housing for All by 2022? policy of the Government, this deduction under Section 80EEA has been extended to the next financial year.
Features of Section 80EEA
Who can avail this deduction?
Only individuals and not any other taxpayer can avail this deduction. For example, Partnership firm, a HUF, AOP, a company, or any other kind of taxpayer, are not entitled to any benefits under section 80EEA.
How much deduction can I avail through home loan?
A deduction up to Rs 1,50,000 is available under Section 80EEA for interest payments which is over and above the deduction of Rs 2 Lakhs for interest payments available under Section 24 of the Income Tax Act. Hence, an individual taxpayer is privileged to a total deduction of Rs 3.5 Lakhs for interest on home loan. However, these are further subject to conditions applicable under this section.
Is this similar to section 80EE?
First time home buyers are meant to be highly benefited from this policy if one avails a home loan valued up to Rs 45 Lakhs and is sanctioned before March 31, 2021. The middle-class strata of the society will mainly profit from this and affordable housing shall be an integral part of the Government?s Housing for All by 2022 policy.
Conditions Applied on Tax Benefits on Home Loan under Section 80EEA?
A financial institution or housing finance company must be lending the loan to the individual to buy property for residential purpose only.
The stamp duty value of the house property should not exceed Rs 45 lakhs.
The individual availing the scheme shall not be qualified to claim deduction under the existing Section 80EE.
The taxpayer must be purchasing a residential property for the first-time and cannot own any residential house property as on the date of sanction of the loan.
The carpet area of the property shall be not more than 645 sq ft in metropolitan cities and 968 sq ft in any other cities or towns.*
The property for which the individual wants to avail this scheme must be approved on or after September 1, 2019.*
Inorder to avail tax deduction, one first needs to ensure that the property is individually or jointly owned by the taxpayer and the loan is sanctioned against the individual or jointly with another co-borrower. The home loan certificate must be submitted to the employer for adjustment of TDS whereas, in case of self employed individuals, one must use it while filing tax deduction for self.
*These conditions have been specified in the memorandum to the finance bill, but not mentioned in section 80EEA.
