Withdrawal of Deduction on Home Loan

Withdrawal of Deduction on Home Loan-u/s 80EEA From 01/04/2022.

Under Section 80EEA, first-time home buyers in India enjoy additional deductions on income tax. However, the benefits of 80EEA are applicable only if they buy an affordable property with the help of home loans.

80EEA of the income tax act enables home buyers make up to Rs 1.50 lakh of their income in a year tax-free. 

Offered over and above the benefits enjoyed by other categories of buyers, the benefits to first-time home buyers in India are offered under Section 80EE and Section 80EEA.

 The 80EEA deduction is over and above the Rs 2-lakh-deduction limit allowed under Section 24 (b). However, 80EEA deduction is linked to the cost of the house and is extended on the purchase of housing units worth up to Rs 45 lakhs. The affordability of the house is also decided by the carpet area of the property. If a unit is located in a metropolitan city, its carpet area should not exceed 645 sq ft or 60 sq meters, for the owner to claim the benefit under Section 80E For units in any other city, the carpet area has been limited at 968 sq ft or 90 sq meters.

As per the income tax rules, from 1st April 2022, a home loan borrower will get two income tax benefits under Section 24(b) and Section 80C of the Income Tax Act. Under Section 24(b), a home buyer can claim income tax deduction on up to ₹2 lakh in one financial year on the interest component of its home loan EMI. However, this benefit can be claimed after getting possession of the property. Under Section 80C, borrowers can avail a tax benefit of up to ₹1.5 lakh on the principal amount paid through home loan EMI.

For a first-time buyer, then, the annual tax rebate against home loan interest payment thus comes to Rs 3.50 lakhs.