Budget 2019 proposes the insertion of section 80EEA to increase the benefit of Tax Deduction on the interest paid towards home loan up to ₹ 45 lakhs for affordable housing. The additional tax deduction of ₹1.50 lakhs is for the home loan taken up to 31st March 2020. The cumulative benefit would be ₹ 7 lakhs for 15 years loan.
Affordable Housing means a dwelling unit with carpet area less than or equal to 60 square meters in metropolitan cities or 90 square meter in cities or towns other than metropolitan cities of Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region).
Presently, in case of a self-occupied house, the benefit of the tax deduction on the interest paid on home loan under section 24B is restricted to ₹ 2 lakhs and on the principal repayment of the home loan the limit is ₹ 1.50 lacs under section 80C.
Budget 2017 has capped the limit on the claiming of interest paid on home loan towards rented or deemed to be let out houses. Earlier there was no restriction on the home loan interest for the rented or deemed-let-out property. But after Budget 2017, loss from the rented or deemed let out property is restricted to ₹ 2 lakhs per annum. Thus, reducing the benefits of the tax deduction on the interest paid on home loan for the second house.
Bifurcation of Home Loan Tax Benefits
# Section 80C: Under Section 80C, a deduction up to ₹ 1.50 lakhs for the home loan principal repayment.
# Section 24B: Deduction of Interest Paid on a home loan up to ₹ 2 lakhs.
# Section 80EEA: Additional benefit of tax deduction up to ₹ 1.50 lakhs, subject to the following conditions:
Conditions for Additional Tax Deduction on Interest Paid towards Home Loan under section 80EEA
- The owner should be a First Time Home Owner.
- The Home Loan shall be taken up to 31st March 2020 i.e. from 1st April 2019 to 31st March 2020.
- Home Loan should be for affordable housing.
- The registration value shall not exceed ₹ 45 lakhs.
- The benefit of the tax deduction is available from Assessment Year 2020-21 and so on.
- The total tax deduction is ₹ 3.50 lakhs for the first time homeowners.