In 2019, Finance minister Nirmala Sitharaman announced a lucrative policy in the Union Budget. This was Section 80EEA which aims to stimulate the ‘Housing for All by 2022’ program targeted by the central government. This program offers home buyers to save an additional INR 1.50 lakhs or even achieve the INR 2-lakh-deduction limit allowed under Section 24 (b). per year against home loan interest payments if they invest in an ‘affordable property’.
Important facts about section 80EEA
It is essential for first time home buyers to be aware of the benefits that can be availed under section 80EEA. Here are a few must-known facts about it:
Only first-time homebuyers are eligible to claim benefits under this law, as this section specifies the definition of a first-time homebuyer as one who should not own any residential property at the time the home loan is applied for or granted. For tax calculation, a single working adult is listed as a separate household. Therefore, such an individual is considered a first-time homebuyer even though his parents may own a property.
The lucrative offer for tax savings stands true for only individual buyers. This means companies, undivided or joint families, etc. will be unable to claim these benefits. Partnership firms or organizations like AOP, HUF, BOI, or any other taxpayer are ineligible for the deductions under this section.
The tax and finance gurus interpret that not only Indian nationals but even non-resident Indians (NRIs) can put a claim on the deductions under this section as there is no law which specifies nationality.
Acceptable source for the home loan
This first-time buyer will have to mandatorily take the home loan from a financial institution such as banks or home-loan setups and not from family members, relatives, friends, or unofficial money lenders.
Listed property type
People who will be buying residential properties will be eligible to claim the benefit. The buyer must note the specified conditions that the loan must not be borrowed for reconstruction, repair, or maintenance purposes.
Maximum property value
The stamp value of the property cannot exceed the “affordable” amount of Rs 45 lakhs.
Maximum carpet area limit for claim
Under the Finance Bill, a unit located in a metropolitan city cannot exceed 645 sq ft or 60 sq meters in its carpet area, to be able to claim the deductions under this section. The carpet area has been capped off at 968 sq ft or 90 sq meters in other cities.
It must be noted that the cities that are considered metropolitan in this section are Kolkata, Mumbai, Chennai, Delhi, Faridabad, Ghaziabad, Noida, Greater Noida, Gurugram, Hyderabad, and Bengaluru.
Range of deductions
This section permits up to Rs 1.50 lakhs of deduction. Note that this deduction is above the Rs 2 lakhs on interest payment that can be claimed under Section 24(b). Therefore, a first-time buyer can get an annual tax rebate of up to Rs 3.50 lakhs against their home loan interests. You can know more on section 80EEA and familiarize yourself with the deductions under this section to avail yourself its benefits.
Property not occupied by self
This section does not provide any specifications that in case the property isn’t self-occupied, one cannot seek the tax deductions. This provides a loophole to the buyers who dwell in rented accommodations to claim tax breaks alongside their HRA benefits as per Section 80 GG.
Section 80EE vs 80EEA
It must be duly noted that if the buyers claim tax breaks under Section 80EE, they automatically become ineligible for deductions under Section 80EEA.
First-time buyers must make themselves aware of the difference between the two sections as those who claim deductions under Section 80EE will be ineligible to claim the deductions offered under Section 80EEA. One must know that the property value goes up to INR 50 lakhs for 80 EE and up to Rs 45 lakhs for the other section. While the former has the Maximum rebate of INR 50,000, the latter offers one of INR 1.50 lakhs
Duration of the period covered
According to the 2019 Budget, home loans that have been sanctioned between April 1st of 2019 and March 31st of 2022 allow their buyers to claim benefits.
The pandemic has been detrimental to the economic growth in the year 2021 as well. This has led India’s finance minister, Ms. Nirmala Sitharaman, to announce that this section under income tax will remain open for another year. The new proposal is to extend the dates for sanctioning the outer loan date from 31st March 2021 to 31st March 2022. This amendment is most likely to be implemented from the 1st April of 2022 and will apply to the assessment session of 2022-23. This will prove to be a huge support for the many first-time home buyers, searching for affordable solutions. Thanks to the 80EEA income tax deductions, they have a chance to save an additional INR 1.5 lakhs in exchange for their application for a home loan.