Section 80EE vs. 80EEA: Interest on Housing Loan Deduction in India

Owning a house is no longer a distant thought in 2023. Nowadays, the Indian government offers plenty of tax-saving incentives and schemes to encourage people to own or build their own houses. Those planning to buy a house do not need to save money for years and spend considerable amounts on their property purchase. They can easily get Home Loans from various housing financing companies and get other associated benefits.

Tax benefits offered through sections 80EE and 80EEA help borrowers claim substantial deductions from their taxable income. In the below sections, we will discuss 80EE vs. 80EEA and understand their conditions and offerings.

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Understanding the Tax-Saving Scheme Benefits

Section 80EE: The section allows first-time home buyers to claim tax deductions of up to ₹ 50,000 on the applicable interest amount of the housing loan. Loan borrowers can claim a maximum deduction of ₹ 50,000 under this tax regime for a financial year. It is over the tax deduction of ₹ 2 Lakh and ₹ 1.5 Lakh under Sections 24 and 80C, respectively.

Section 80EEA: As a part of the Indian government’s ‘Housing for All’ initiative, the section has increased the interest deduction cap to ₹ 1.5 Lakh for buyers who purchased a home in FY 2019-20 or 2020-21. Home buyers who bought a property during this period can claim a deduction of ₹ 1.5 Lakh from their taxable income under Section 80EEA.

Terms and Conditions for Claiming the Deductions

Let’s look at the terms and conditions for claiming deductions under the two sections.

For Section 80EE:

The taxpayer should be a first-time Home Loan borrower to claim the benefit under Section 80EE.
An individual can claim a deduction only for the Home Loan interest paid.
The borrower should have used the loan to purchase a residential property only. It does not apply to commercial properties.
The borrower should apply for Home Loan not exceeding ₹ 35 Lakh.
The property’s value should not be more than ₹ 50 Lakh.

For Section 80EEA:

Individuals are eligible for a tax deduction only if they are first-time home buyers.
The property’s stamp duty should be under ₹ 40 Lakh.
The property should be in a metro city, and its carpet area should be at most 645 sq. ft.
The deduction’s upper limit is ₹ 1.5 Lakh.

Eligibility for Tax Deductions

The taxpayer must meet the following eligibility criteria to claim a tax deduction under the two sections.

Under Section 80EE:

Only individual borrowers buying a property jointly or single-handedly can claim a tax deduction.
AOP (Association of Persons), HUF (Hindu Unified Families), and trusts are not eligible.
Taxpayers may or may not occupy the property for a tax deduction.

Under Section 80EEA:

The taxpayer should reside in the property to claim a tax deduction under the section.
Only individual borrowers can claim a tax deduction on a property bought jointly or single-handedly.
AOP (Association of Persons), HUF (Hindu Unified Families), and trusts are not eligible.
The taxpayers cannot claim a tax deduction under Section 80EE.

Must Read: Top 5 Factors That Affect Home Loan Interest Rate

Points of Difference Between Sections 80EE and 80EEA

Here are a few points of difference one must remember between sections 80EE and 80EEA:

Property Value: To claim a tax deduction under Section 80EE, the property value should not exceed ₹ 50 Lakh. For Section 80EE, it is capped at ₹ 45 Lakh.

Loan Amount: A tax deduction under Section 80EE is applicable only for a Home Loan of up to ₹ 35 Lakh. Section 80EEA has no upper limit on the loan amount for a tax deduction.

Maximum Tax Deduction: Section 80EE allows a tax deduction of up to ₹ 50,000. With Section 80EEA, taxpayers can claim a tax deduction of up the ₹ 1.5 Lakh.
Applicable Loan Period: Home Loan applicants can claim deductions under Section 80EE FY13-14, FY14-15, and FY16-17. For Section 80EEA, the applicants must have taken a Home Loan for FY20-21 and FY21-22.

Sections 80EE and 80EEA are part of the taxation regime that offers financial benefits to property buyers. Now that you understand 80EE vs. 80EEA, apply for a Home Loan and get ready to receive the associated benefits.