80EE vs 80EEA: Know the Difference for Home Loan Deductions

80EE vs 80EEA: Know the Difference for Home Loan Deductions

Sections 80EE and 80EEA of the Income Tax Act offer valuable deductions for first-time homebuyers, allowing them to reduce specific amounts of expenses from their net taxable income. These deductions, ranging from ₹50,000 to ₹1,50,000, apply exclusively to the interest component of monthly home loan payments. However, the deductions under Sections 80EE and 80EEA depend on when the house loan was approved. The main difference between Section 80EE and Section 80EEA is that Section 80EE offers tax benefits on home loans up to INR 35 Lakh, while Section 80EEA provides tax benefits on home loans up to INR 45 Lakh. This article will give you complete information on the differences between Section 80EE vs 80EEA.

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What is Section 80EE?

Section 80EE of the Income Tax Act provides a tax deduction on house loan interest for first-time homebuyers. Under this section, individuals who have taken out a home loan for a property valued up to Rs 50 lakhs and with a loan amount up to Rs 35 lakhs are eligible for tax benefits. The Section 80EE deduction allows you to claim up to Rs 50,000 per financial year on the interest paid towards the home loan. This benefit can be availed until the full repayment of the loan is completed.

Who is Eligible for Section 80EE Deduction?

To claim the Section 80EE deduction, a taxpayer must meet the following criteria:

• Individual Taxpayer: Only individual taxpayers, and not entities like Hindu Undivided Families (HUFs), Associations of Persons (AOPs), corporations, or trusts, are eligible for this deduction.
• First-Time Homebuyer: The taxpayer must be purchasing their first residential property. This means they should not have previously owned any residential property in their name or their spouse’s name.
• Loan from Financial Institution: The property must be purchased using a loan from a financial institution.
• Residential Property: The property must be residential and not a commercial or industrial property.

Note: The taxpayer must not live in the property to claim the deduction. Even if they are renting it out, they can still do so.

How to Claim Income Tax Deduction under Section 80EE?

To claim the income tax deduction under Section 80EE, follow these steps:

1. Calculate Interest Paid: Determine the total interest paid on the home loan during the financial year.
2. Claim Deduction Under Section 24: Deduce up to ₹2,00,000 from your taxable income under Section 24 of the Income Tax Act, 1961. This deduction is for interest paid on any home loan.
3. Claim Deduction Under Section 80EE: Any remaining interest paid can be claimed as a deduction under Section 80EE up to a maximum of ₹50,000.

What is Section 80EEA?

Section 80EEA, introduced in the 2019 Union Budget, provides first-time homebuyers in India with extended tax breaks. This section allows individuals to deduct up to Rs 1.5 lakhs from their home loan interest when purchasing a residential property. The benefit is in addition to the existing Rs 2 lakh tax deduction under Section 24 of the Income Tax Act. Moreover, this Section 80EEA deduction can be claimed over and above the benefits available under Section 80C of the Income Tax Act, 1961, offering substantial tax relief for eligible homebuyers.

Who is Eligible for Section 80EEA Deduction?

To claim the Section 80EEA deduction, a taxpayer must meet the following criteria:

• Individual Taxpayer: Only individual taxpayers, not entities like Hindu Undivided Families (HUFs), Associations of Persons (AOPs), corporations, or trusts, are eligible for this deduction.
• Residential Property: The property must be residential and not commercial or industrial.

How to Claim Income Tax Deduction under Section 80EEA?

To claim the income tax deduction under Section 80EEA, follow these steps:

1. Meet Eligibility Criteria: Ensure that you meet the following conditions:
   • First-Time Homebuyer: You should not have owned any residential property in your name or your spouse’s name before the loan was sanctioned.
   • Carpet Area: The carpet area of the property must be:
     • Less than or equal to 60 square meters (645 square feet) if located in a metropolitan city (Delhi NCR, Mumbai, Hyderabad, Bangalore, Kolkata, Chennai, or Delhi).
     • More than 90 square meters (968 square feet) if located in any other city or town in India.
   • Stamp Duty: The stamp duty paid for the property should not exceed ₹45 lakhs.
   • Loan Sanction Date: The home loan must have been sanctioned between 2019-2020 and 2020-2021.
2. Calculate Deduction: You can claim a deduction of ₹1,50,000 from your net taxable income under Section 80EEA.

Important Note: The deduction under sections 80EE and 80EEA is not available under the new tax regime. To claim these deductions, taxpayers must opt for the old tax regime.

80EE vs 80EEA: Difference between Section 80EE and Section 80EEA

In the table below, we have given the difference between Section 80EE and Section 80EEA:

Can I claim both 80EE and 80EEA?

No, you cannot claim both 80EE and 80EEA deductions simultaneously. The eligibility for these deductions depends on the period the home loan was availed. Therefore, you cannot claim the other if you have already claimed a deduction under one section. However, you can claim either 80EE or 80EEA in addition to the deduction provided under Section 24, which allows you to deduct up to ₹2,00,000 from your taxable income for interest paid on any home loan.

Conclusion

Sections 80EE and 80EEA offer tax benefits to first-time homebuyers in India. The main difference of Sections 80EE vs 80EEA lies in the eligibility criteria and the amount of deduction available. Section 80EE provides a deduction of up to ₹50,000 for home loans up to ₹35 lakhs, while Section 80EEA offers a deduction of up to ₹1,50,000 for affordable housing. It’s important for homebuyers to understand the specific requirements and eligibility criteria for each section to maximize their tax savings.

With IndiaFilings’ expert assistance, you can simplify your ITR filing process and ensure accurate claiming of Section 80EE and 80EEA benefits!