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After saving a significant portion of freelancing income for 4 consecutive years, Ruchita was ready to buy a dream house for her parents.

To buy the house, Ruchita borrowed a home loan. 

She already knew that she could claim home loan interest amount as income tax deduction.

However, much to her delight, Aakash (her best friend and a tax consultant) told her that she could claim up to additional INR 1.5 lakhs as the deduction in her income tax return for paying home loan interest. 

Are you a first-time homebuyer

If you are a first-time homebuyer, it's time to get delighted, just like Ruchita got.

Under Section 80EEA, you can claim a deduction of up to INR 1.5 lakhs if you have bought a home for the first time and you are paying home loan interest. This amount is over and above the home loan interest deduction of INR 2 lakhs that you can avail of under section 24.

Thus, you can claim a deduction of up to INR 3.5 lakhs in total (INR 2 lakhs in section 24 and INR 1.5 lakhs in section 80EEA).

Suppose, you are paying a home loan interest of INR 3 lakhs every year. In such a case, you can claim deduction of INR 2 lakhs under Section 24 and the remaining INR 1 lakh under Section 80EEA.


Condition for deduction

This deduction is available only if the stamp duty value of your home is up to Rs 45 lakh rupees. Also, you should be a first-time homebuyer and not own any other residential property.

This deduction is available only if the home loan has been sanctioned on or after 1st April 2019.


Important points to consider

  • You can claim deduction under section 80EEA only if you are an individual. HUFs, partnership firms or companies are not allowed to claim any deduction.
  • You shouldn’t be eligible to claim deduction under section 80EE.
  • If you are a joint owner of the property, you and other joint co-owners can claim deduction under section 80EEA.
  • For the purpose of this section, a financial institution is a banking company to which the Banking Regulation Act, 1949 applies, or any bank or banking institution referred to in section 51 of that Act or a housing company.

If you don’t own any house yet and you are willing to buy a dream soon, this is the best time to invest. 

Home loan interest rates are at an all-time low. The Government has provided various relaxations regarding stamp duty and income tax. Also, banks are willing to offer add-ons with the bank loan that will make your life easier.

What are you waiting for?

The author is a leading copywriter who helps brands and individuals persuade their prospects and communicate their brand story. He also helps leading influencers, agency owners, and freelancers file their income tax returns and manage their finances hassle-free. 

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Category Income Tax, Other Articles by - Hardik Lashkari