Own a house? Claim this Extra Tax Benefit

Buying a house with a home loan has definite tax benefits in the form of deduction against home loan interest paid and home loan principal repaid. Besides these, from the financial year 2019-20 i.e from the assessment year 2020-21, you can also save tax through an additional deduction of ₹1,50,000/-. This deduction is introduced from this assessment year (I-T Returns to be filed in this year). It can be claimed during the lifetime of the home loan provided the entire deduction under this provision does not exceed an amount of ₹1,50,000/-. This deduction is not provided to all home buyers but only those of affordable low-cost homes. This is an additional deduction besides the already existing deduction against income from house property. This deduction is not to be claimed from the income from house property but from the gross total income itself.

What is this deduction u/s 80EEA?

  • This additional deduction is available in respect of interest repayment on housing loan borrowed from the financial institution and banks
  • The interest repayment deduction against income from house property is available in respect of loans borrowed from friends and relatives but that is not the case in respect of this deduction. In this case, the loan has to be borrowed from a financial institution or bank
  • A similar deduction is also available of ₹50,000/- u/s 80EE of the Income-tax Act but this is available only if you have borrowed the home loan in the financial year 2016-17. If you have availed deduction u/s 80EE or if you are eligible to avail that deduction, you are disqualified from claiming the deduction of ₹1,50,000/- u/s80EEA

Conditions for eligibility of deduction u/s 80EEA

  • This deduction is available only to individuals and NOT to HUFs or firms
  • The agreement value of the house bought by you must not exceed ₹45,00,000/-
  • The home must be financed with a home loan
  • Such home loan must be borrowed in the financial year 2019-20 or 2020-21 (purchase agreement date is not relevant)
  • On the date of sanction of this home loan, you must not own any other residential house property
  • This deduction can be claimed in the assessment year 2020-21 and subsequent assessment years
  • The amount against which this deduction is claimed can not be claimed as a deduction against any other section for e.g. on a home loan if you have total interest repayment of ₹200,000/-, and you have claimed the same as a deduction against income from house property u/s 24 of the Income-tax Act, then again, you can not claim the same amount as deduction u/s 80EEA. However, if you have interest repayment of ₹2,50,000/- and you have claimed ₹2,00,000/- as deduction u/s 24 of the Income-tax Act, then the remaining amount of ₹50,000/- can be claimed as deduction u/s 80EEA.

Income from house property and deduction u/s 80EEA

  • This deduction is to be deducted from the gross total income and not income from house property
  • The interest deduction u/s 24 is to be deducted from income from house property
  • If the amount of total interest repaid does not get consumed in claiming deduction u/s 24 of the Act, then you can claim the un-consumed portion u/s 80EEA
  • If you own a home in a joint ownership and both the co-owners have borrowed the home loan, then both the co-owners can independently claim deduction upto the limit of ₹1,50,000/-