Section 80EEA

What is Section 80EEA?

Introduced in the 2019 Union Budget, Section 80EEA was designed to promote affordable housing under the government’s "Housing for All" initiative. It allows first-time homebuyers to claim an additional deduction on home loan interest payments of up to ₹1.5 lakh per financial year. This benefit remains available in 2025 for loans sanctioned between April 1, 2019, and March 31, 2022. The benefit is valid until the loan is repaid or for a maximum of five years.

Eligibility Criteria for Section 80EEA

To qualify for this deduction in 2025, the following conditions must be met:

• The taxpayer must be a first-time homebuyer with no residential property at the time of loan sanction.

• The property’s stamp duty value must not exceed ₹45 lakh.

• The loan must have been sanctioned between April 1, 2019, and March 31, 2022.

• The loan must be from a recognised financial institution or housing finance company.

• The property’s carpet area must not exceed 60 square meters (645 sq ft) in metropolitan cities (Bengaluru, Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai) or 90 square meters (968 sq ft) in other cities.

Key Benefits of Section 80EEA

• Additional Tax Savings: Section 80EEA provides extra tax relief of up to ₹46,800 annually (assuming a 30% tax bracket).

• Affordable Housing Focus: The provision specifically targets affordable housing, with properties valued at ₹45 lakh or less.

• First-Time Buyer Support: This deduction benefits first-time homebuyers, encouraging entry into the real estate market.

• Joint Ownership: If the property is jointly owned, both owners can claim the deduction individually if both are repaying the loan.

Challenges and Limitations

• Deadline Constraint: Loans must be sanctioned by March 31, 2022, meaning new homebuyers in 2025 cannot benefit from this deduction.

• Old Tax Regime Only: The deduction is available only under the old tax regime, limiting its appeal as more people opt for the new regime.

• Property Value Cap: The ₹45 lakh value cap may be restrictive in metropolitan areas where property prices are higher.

• Limited Duration: The benefit is available for up to five years, which is shorter than typical home loan tenures.

Conclusion

Section 80EEA offers significant tax relief for first-time homebuyers, but it comes with specific eligibility criteria and deadlines. Eligible homebuyers can integrate this benefit with other tax deductions, such as those under Section 80C and Section 24(b), to maximise their tax savings.