Owning a house in 2023 is no longer troublesome. You don’t have to spend a considerable amount of time considering the various benefits that come along with a home loan. Today, the government has introduced us to plenty of tax-saving schemes and incentives to encourage people to build or own their own space.

Section 80EE and Section 80EEA come under the Income Tax Act and give anyone buying a new home the privilege to claim deductions directly from their net taxable income. Under 80EE and 80EEA, the range of deductions available is between INR 50,000 and INR 1,50,000, respectively. This deduction can only be applied to the interest portion of the home loan EMI.

One crucial piece of information to be aware of is to claim a deduction under 80EE or 80EEA, but not both. 80EE vs 80EEA is a long discussion; let’s examine how they differ.

Section 80EE - Understanding The Scheme

First-time house buyers can claim tax deductions under Section 80EE. The claim is only applicable to the interest amount of the home loan. INR 50,000 is the maximum deduction a loan-taker can claim under this income tax regime for one financial year. This claim can be availed over Section 24 and Section 80C, which are set at a bar of INR 2,00,000 and INR 1,50,000 INR, respectively.

What is 80EEA Exemption?

The exemptions under Section 80EEA of the Income Tax Act provide first-time buyers with a deduction of up to INR 1.5 lakhs* on their home loan interests. It acts as a helping hand to individuals who will be buying their home for the first time. Exemptions under this section encourage individuals to purchase or construct their new houses and invest in the housing sector.

Eligibility

The exemptions under Section 80EEA are only available for individuals who are first-time homebuyers. They should not own any existing residential property at the time of loan approval.

Maximum Deduction

This act offers a maximum deduction of INR 1.5 lakh* in each financial year. The amount of deduction would vary according to the home loan’s amount.

Affordable Housing

Section 80EEA offers a deduction on all home loans issued for the purpose of affordable housing properties. The maximum stamp value of the property should not exceed INR 45 lakhs, and the loan amount should be less than INR 35 lakhs.

Property Joint Ownership

For properties with joint ownership, the owners can claim the deduction individually or jointly, where each individual can claim a deduction of INR 1.5 lakh.

Time Limit

The deductions under Section 80EEA are only applicable to home loans approved by lending institutions between April 1, 2019 and March 31, 2022.

Existing Deductions

You can make use of exemptions under Section 80EEA along with another deduction from Section 24(b), where you get up to INR 2 lakhs deducted.

Section 80EE- Deduction on Home Loan Interest

Under Section 80EE of the Income Tax Act, you can get a deduction of up to INR 50,000 from your net taxable income. This deduction is in addition to the ones made in accordance with Sections 80(c) and 24(b). It is available to first-time homebuyers and loans approved by lending institutions between April 1, 2016, and March 31, 2017.

Terms & Conditions For Claiming The Section 80EE Home Loan

Below are the terms and conditions for claiming tax deductions under Section 80EE:

• For the taxpayer, the home loan should be their first.
• The deduction is applicable only for the interest paid on the home loan.
• The loan isn’t provided on commercial properties.
• The upper cap on the home loan is INR 35 lakh.
• The value of the house must be INR 50 lakh or less.

Eligibility To Claim The 80EE Tax Deduction

Fitting into specific eligibility criteria is mandatory for homebuyers confirming they can claim the tax deduction under the said section.

• Under Section 80EE, only individual borrowers can claim deductions on a property they buy single-handedly or jointly.  
• Section 80EE is not applicable for AOP (Association of Persons), trusts, and HUF (Hindu Unified Families).
• The taxpayer may or may not live in the property to be eligible for the tax deduction.

Section 80EEA - Understanding The Scheme

This section falls under the objective of “housing for all”, where the government has increased the cap for interest deduction to INR 1,50,000. Therefore, buyers who have purchased a property between April 1, 2019, and March 31, 2022 can claim an 80EEA deduction from their net taxable income.

Section 80EEA - Deduction on Home Loan for Interest

Under Section 80EEA of the Indian Income Tax Act, interest paid on home loans taken out for the purpose of building or buying an affordable residence can be written off as a tax deduction of up to Rs. 1.5 lakh every financial year. This deduction can be claimed in addition to the existing tax breaks under Sections 80C and 24. Its benefits are accessible for a maximum of five years, beginning with the financial year in which the loan is approved.

Terms & Conditions For Claiming The Section 80EEA Home Loan

Below are the terms and conditions for claiming tax deductions under Section 80EEA:

• One is eligible for the deduction under 80EEA if they are first-time home buyers.
• Stamp duty on the property should be INR 40 lakh or less.
• Property in metro cities can’t go beyond a 645 sq. ft. carpet area.
• The upper limit of the deduction is INR 1,50,000.

Eligibility To Claim The 80EEA Tax Deduction

• It is not mandatory for the taxpayer to live in the property to be eligible for the tax deduction. However, they must not own the residential property on the date of sanction of loan.
• Under Section 80EEA, only individual borrowers can claim deductions on a property they buy single-handedly or jointly.
• Section 80EEA is not applicable for AOP (Association of Persons), trusts, and HUF (Hindu Unified Families).
• The deduction can only be claimed by the people whose loan has been sanctioned between 01st April 2019 and 31st March 2022.
• As per law, one cannot claim deductions under both Sections simultaneously.

Differences Between 80EE And 80EEA

Though the eligibility criteria sound similar for the two Sections, there are vast differences between 80EE and 80EEA.

Here are the highlights of 80EE vs 80EEA

Must Read:What is Form 16? Know its Benefits While Tanking Home Loans

Key Terms to Know Before Filling Tax Benefits Under 80EE and 80EEA

While availing of tax deductions, here are some critical terms that one often encounters:

While Sections 80EE and 80EEA offer tax benefits to new homeowners, if you wish to claim your home loan benefits, then you should be aware of a few terms before filing for the tax benefits under these sections. These terms would be vividly used in the process of claiming deductions. So given below are a few of these terms:

Carpet area:It is the total area covered within the walls of the house, including the bathrooms and kitchen. It excludes common areas like stairs, balconies, lifts, corridors, etc.

Annual value:The amount of rent or rental income that can be generated by a property is known as its annual value. It is decided according to the government’s assessment.

Loan to Value (LTV) ratio The ratio of the amount of the loan to the actual cost of the property is known as the Loan to Value (LTV) ratio. It is determined in percentages and helps with deductions.

Gross total income: The total income earned by an individual from various sources, like salary, business, etc., is known as the gross total income. It is useful in the loan sanctioning process.

Financial Institution - It is mainly referred to as the lender on which the Banking Regulation Act rules are applicable.

Stamp Duty Value - The value is assessable by the state government or the central government's authority.

Must Read:All About Carpet, Built-Up And Super Built-Up Area

Conclusion

Tax deductions are a lesser-known topic that most are yet to explore. The Sections 80EE and 80EEA are part of the income tax regime that many must look into for financial benefits.

While applying for a house loan, especially for first-time buyers, it is helpful if they know how to claim the deductions from Sections 80EE and 80EEA. So, if you have been sitting in the backseat before applying for a home loan, we have got your concerns covered. At SMFG Grihashakti, one can get a home loan approval by following simple steps. It starts with checking your eligibility, submitting the documents, and approving the principal amount. If you have the relevant documents, what are you waiting for?