Section 80eea: Tax Rebate Against Home Loan Interest Payment

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In this article, we might discuss at duration Section 80EEA and answer every question across the advantages, eligibility, deduction restrict and extra, offered to first-time home shoppers under this segment

Under Section 80EEA, first-time home shoppers in India revel in extra deductions on income tax. However, the blessings of 80EEA are relevant handiest in the event that they buy an low cost belongings with the assist of home loans.

80EEA of Income Tax Act
In its first term that started out in 2014, the prime minister Narendra Modi-led NDA government released its flagship ‘Housing for All by 2022’ programme. With the same objective, it also announced the release of the Pradhan Mantri Awas Yojana (PMAY), to incentivise house purchase thru subsidies offered by the centre. Section 80EEA become brought by using finance minister Nirmala Sitharaman in the 2019 Union Budget with an aim to offer a lift to the centre’s ‘Housing for All by means of 2022’ programme, by way of manner of presenting extra tax benefits on the acquisition of low-cost houses.

80EEA of the profits tax ...
... act permits domestic customers make up to Rs 1.50 lakh of their earnings in a yr tax-loose. Offered over and above the blessings loved with the aid of other classes of consumers, the advantages to first-time domestic buyers in India are supplied underneath Section 80EE and Section 80EEA. We will talk all of the aspects of Section 80EEA in this text.

80EEA deduction
Launched inside the 2019 Budget, Section 80EEA enables first-time home consumers to save an additional Rs 1.50 lakhs in step with 12 months in opposition to home mortgage hobby payments if they may be buying an ‘affordable property’. The 80EEA deduction is over and above the Rs 2-lakh-deduction restrict allowed under Section 24 (b). However, 80EEA deduction is related to the fee of the house and is prolonged on the purchase of housing devices really worth as much as Rs forty five lakhs. The affordability of the residence is likewise determined through the carpet region of the property. If a unit is positioned in a metropolitan town, its carpet vicinity should no longer exceed 645 sq.Toes or 60 squaremetres, for the proprietor to claim the gain under Section 80EEA. For gadgets in every other city, the carpet place has been limited at 968 sq.Toes or ninety squaremetres.

80EEA deduction amount 
One can get up to Rs 1.50 lakhs of deduction under Section 80EEA. This is over and above the deduction of Rs 2 lakhs on interest fee underneath Section 24(b). For a first-time purchaser, then, the annual tax rebate against home loan interest fee for this reason involves Rs three.50 lakhs.  Since the ‘low-priced’ tag of the assets stays the figuring out element on whether or not you could claim deductions under Section 80EEA, it becomes pertinent to have a clean concept about what an less expensive belongings is.

 Income tax deductions for interest paid on domestic loan
Section 80EEA, 24(b), 80EE
 

80EEA deduction eligibility
The Finance Bill, 2019, similarly targeted the eligibility to avail of benefits under Section 80EEA.

Who can claim 80eea deduction?
Only first-time domestic consumers can claim advantages below this Section, because it specifies that on the time of supply of the home loan the borrower ought to no longer own any residential belongings.

Who is a primary-time homebuyer as per 80eea?
A first-time home client is a person who does no longer personal a assets in his call on the time of making use of for his home mortgage. For tax calculation purposes, a operating person, even if single, is taken into consideration a separate household and as a result, a first-time home consumer even though his dad and mom personal houses.

What is the deduction for beneath 80eea?
Deduction can be claimed in opposition to home mortgage hobby price simplest.

What is 80eea deduction limit?
The deduction restrict is Rs 1.50 lakhs in step with yr.

What is the period protected beneath 80eea?
Borrowers whose home loans are sanctioned among April 1, 2019 and March 31, 2022, can claim advantages.

Which category of customer can follow for deduction underneath Section 80EEA?
Only man or woman buyers can declare deductions underneath this segment. This means corporations, Hindu undivided families, and so on., can't claim benefits.

What ought to be the source of the home mortgage for phase 80eea to use?
The customer has to take the house mortgage from a financial organization (banks housing finance agencies) and no longer from family participants, family or pals.

What ought to be the property value for segment 80eea to apply?
The stamp cost of the belongings should now not exceed Rs 45 lakhs.

What sort of assets is protected beneath 80eea?
Buyers of residential residence belongings can declare the gain. It is likewise targeted that the mortgage should be borrowed for buying the property and no longer reconstruction, repair, protection, etc.

What is the difficulty under phase 80eea?
If a customer is claiming deductions under Section 80EE, he cannot declare deductions beneath Section 80EEA.

Can NRIs claim Section 80EEA deduction?
Since the regulation does now not specify whether a primary-time buyer needs to be a resident Indian to claim deduction, it has been interpreted with the aid of tax specialists that even non-residents declare deductions beneath Section 80EEA.

Conditions to say Section 80EEA deduction
What is the carpet location restrict of units, to say deduction beneath Section 80EEA?
According to the Finance Bill, if a unit is placed in a metropolitan city, its carpet area ought to now not exceed 645 squareft or 60 squaremetres, to claim the Section 80EEA gain. For units in some other metropolis, the carpet area has been limited at 968 squaretoes or 90 squaremetres.

Which cities are taken into consideration metropolitan towns under Section 80EEA?
Cities which are considered metropolitan for this purpose are Bengaluru, Chennai, Delhi, Faridabad, Ghaziabad, Greater Noida, Gurugram, Hyderabad, Kolkata, Mumbai and Noida.

Can Section 80EEA deductions be claimed if the property isn't self-occupied?
Section 80EEA does now not specify if the assets need to be self-occupied, to searching for the tax destroy. This additionally allows consumers who are residing in rented motels to claim deductions while also claiming HRA advantages below Section 80GG.

Can joint proprietors claim Section 80EEA deductions  one after the other?
In case the joint owners also are co-debtors, they can both declare Rs 1.50 lakhs each as deductions underneath this Section, provided they meet all the different situations.

Section 80EE vs 80EEA
First-time customers ought to know the distinction between Section 80EE and Section 80EEA. Those claiming deductions beneath Section 80EE can't claim deductions under Section 80EEA. This is particularly noted in the law.

Difference between 80EE and 80EEA
Particulars Section 80EE Section 80EEA
Property cost Up to Rs 50 lakhs Up to Rs 45 lakhs
Loan amount Up to Rs 35 lakhs Not designated
Loan length protected April 1, 2016 to March 31, 2017 April 1, 2019 to March 31, 2021
Maximum rebate Rs 50,000 Rs 1.50 lakhs
Lock-in duration None None
 

80EE deduction
First-time domestic consumers can declare deduction of up to Rs 50,000 underneath Section 80EE in a financial yr towards payment of domestic mortgage interest.  80EE deductions can be claimed till the house mortgage is fully repaid. Also notice that 80EE deduction is to be had handiest to individuals. This means an HUF, an AOP, a agency, and many others., cannot claim 80EE deduction.

Difference among Section 80EEA and Section 24(b)
Category Section 24(b) Section 80EEA
Possession Must Not required
Loan source Banks or non-public sources Only banks
Deduction restriction Rs 2 lakhs or entire hobby* Rs 1.50 lakhs
Property fee No specification Rs forty five lakhs
Loan duration Loans taken after April 1, 1999 April 1, 2019 to March 31, 2021
Buyer class All home shoppers First-time man or woman home shoppers
Lock-in length** None None
*While a rebate of Rs 2 lakhs is authorized for self-occupied belongings, the whole interest is permitted as deduction in case of permit-out property.

**Section 80C specifies that buyers ought to no longer sell the belongings for five years, to claim deductions. This is known as the lock-in duration.

Buyers can claim deductions underneath both, Section 24(b) and Section 80EEA, and enhance their overall non-taxable earnings to Rs 3.50 lakhs, in the event that they meet the eligibility standards. However, deductions underneath Section 80EEA can handiest be claimed after exhausting the Rs 2-lakh limit under Section 24(b).

How domestic shoppers can use Section 80EEA to claim most deduction?
Since Section 80EEA has been brought to assist the center-profits institution to very own a domestic via way of higher economic support, allow us to see how an awful lot of his profits a person can make non-taxable, if he had been to buy his first domestic nowadays.

Tax calculation instance
Rahul Khanna works at an IT enterprise in Noida and his annual revenue package deal is Rs 15 lakhs. Let us assume that he is not enjoying any tax deductions thus far. At the modern-day tax slab, his total taxable earnings might be:
 

Rs 15 lakhs – Rs forty,000 (This is the usual deduction all tax payers in India revel in) = Rs 14.60 lakhs

Khanna falls within the Rs 12.5 lakhs-Rs 15 lakhs tax bracket. So, the highest rate at which his earnings can be taxed is 30%.

Split of Rs 14.60 lakhs for tax calculations

Rs 2.Five lakhs (@0%) = 0

Rs 2.Five lakhs (@five%) = Rs 12,500

Rs 5 lakhs (@20%) = Rs 1,00,000

Rs 4.6 lakhs (@30%) = Rs 1,38,000

Total = Rs 2,50,500

+ cess (@four%) = Rs 10,020

Khanna’s overall tax outgo = Rs 2,60,520

Now, let us expect that Khanna invests in his maiden property to decrease his tax outgo. He is buying a property well worth Rs 45 lakhs, for which he's taking eighty% of the belongings cost (Rs 36 lakh) as mortgage from a scheduled bank at an 8% hobby charge.

Key numbers

Loan quantity: Rs 36 lakhs

Tenure: 15 years

Interest rate: eight%

This might cause:

EMI of Rs 34,403

Total interest (in 15 years): Rs 25,92,624

Total payable (in 15 years): Rs sixty one,90,624

If Khanna took the mortgage in December 2019, through 2020 (the primary year of the mortgage tenure) he might be paying:

Rs 1,29,522 as domestic loan essential

Rs 2,83,319 as domestic mortgage interest

Under Section 80C, which offers rebate against unique investments, consisting of domestic mortgage major, Khanna can get Rs 1,29,522 from his earnings made tax-free (the higher restrict underneath this Section is Rs 1.50 lakhs in a year).

Under Section 24(b), Khanna can claim Rs 2 lakhs as deduction in opposition to the interest paid.

Now, underneath Section 80EEA, Khanna can also declare the ultimate Rs 83,319 as deduction from the general restriction of Rs 1.50 lakhs.

After applying these kind of deductions, here is the breakup of Khanna’s general taxable earnings:

Rs 15 lakh – Rs forty,000 (Standard deduction)

= Rs 14.60 lakh

Deduction underneath Section 80C: Rs 1,29,522

Deduction under Section 24(b): Rs 2,00,000

Deduction beneath Section 80EEA: Rs 83,319

Total deductions: Rs four,12,841

Total taxable profits: Rs 14,60,000 – Rs four,12,841 = Rs 10,forty seven,159

Khanna still falls within the class of over Rs 10 lakh taxable earnings, so the very best fee at which his profits is taxed stays 30%, however the amount to be taxed at 30% has come down considerably. Here is the cut up of his profits for tax calculations:

Rs 2.5 lakhs (@0%) = zero

Rs 2.5 lakhs (@five%) = Rs 12,500

Rs 5 lakhs (@20%) = Rs 1,00,000

Rs forty seven,159 (@30%) = Rs 14,148

Total tax: Rs 1,26,648

+ cess at 4% = Rs five,066

Total tax outgo: Rs 1,31,714

Total savings as against the earlier outgo:

Rs 2,60,520 – Rs 1,31,714 = Rs 1,28,806

Can I claim deduction below Section 80EEA if loan turned into taken in 2015?
Since the availability specially mentions that the deduction will observe on most effective the ones loans that have been/could be granted between April 1, 2019, and  March 31 2021, human beings whose loans have been sanctioned prior to or after this period, will not be eligible to claim the extra rebate under Section 80EEA.

Section 80EEA: Facts
Even although the deduction beneath 80EEA may be to be had only on domestic loans sanctioned until March 2022, people who are eligible for the rebate can claim deductions for the duration of the time period in their domestic loan compensation.

Under the PMAY regulations, a unmarried incomes member of a family is considered a separate household for tax calculation functions. This also way that an unmarried purchaser, who's financially impartial, is a separate family and can as a result declare tax deductions under Section 80EEA for his first belongings purchase.

Loans for buying Homes in Thane - MCHI Thane. In this article, we would discuss at length Section 80EEA and answer every question around the benefits, eligibility, deduction limit and more, offered to first-time home buyers under this sectionWe look at ways to deal with these changes smoothly. Contact Credai MCHI today!

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