Buying a home is a long-term goal for almost everyone. But, since it’s a big capital investment, we always have to think about whether to use our savings, sell existing assets or take a home loan to complete this purchase.
Well, most people have no choice but to knock doors of a bank and get a home loan. And because home loan is a huge debt that generally lingers on for several years, the government also provides some relief in the form of tax deductions.
Sections 80EE and 80EEA are two such tax benefits that can help lower your taxes if you’ve taken a loan to buy a residential property.
If you’re unsure which one applies to you (or if you qualify at all), here’s a simple breakdown.
What is Section 80EE?
Section 80EE offers extra tax relief to first-time homebuyers on the interest paid on their home loan.
While Section 24 already lets you claim up to ₹2 lakh, Section 80EE gives you an additional ₹50,000 per year, if you qualify.
Let’s see if you do.
Who can claim it?
You can claim this deduction if:
- You’re a first-time residential homebuyer
- The loan amount is ₹35 lakh or less, and the property value is ₹50 lakh or less
- The loan is from a bank or housing finance company
- The property is residential, not commercial
- You’re an individual (not HUF, company, or trust)
Let’s now look at Section 80EEA.
What is Section 80EEA?
Section 80EEA provides a higher tax deduction of up to ₹1.5 lakh on home loan for first-time homebuyers purchasing an affordable house.
This benefit is in addition to the ₹2 lakh tax deduction available under Section 24 of the Income Tax Act.
Let’s see if you’re eligible.
Who can claim it?
You can claim this deduction if:
- You’re a first-time residential homebuyer
- The stamp duty value of the house is ₹45 lakh or less
- The carpet area of the property is:
→ 60 sq. metres or less in metro cities
→ 90 sq. metres or less in other cities and towns - The loan is from a bank or housing finance company
- The property is residential, not commercial or industrial
- You’re an individual (not HUF, company, or trust)
Deduction under both sections 80EE and 80EEA can be claimed even if the house is rented out.
Now let’s look at a quick comparison between both:
| Criteria | Section 80EE | Section 80EEA |
|---|---|---|
| Max deduction | ₹50,000 on home loan interest | ₹1.5 lakh on home loan interest |
| Property value | Up to ₹50 lakh | Up to ₹45 lakh |
| Loan amount limit | Up to ₹35 lakh | Not specified |
| Loan sanction period | 1 April 2016 - 31 March 2017 | 1 April 2019 - 31 March 2022 |
How to claim these deductions?
To claim a home loan interest deduction u/s 80EE or 80EEA, follow these steps:
- Calculate the total interest paid on your home loan during the financial year.
- Claim up to ₹2,00,000 under Section 24. This applies to all homebuyers and covers interest paid on any home loan.
- You can claim any remaining interest amount under either Section 80EE or 80EEA, depending on your eligibility.
Remember, you can claim either 80EE or 80EEA, not both. It depends on your loan’s sanction period and other eligibility conditions we’ve covered.
Got questions? Ask below or share this with someone planning to buy a house.