In this article, Multimedia Studio will discuss the Section 80EEA in depth and answers to all of the queries about the benefits, eligibility, withdrawal limit and more offered to first-time home buyers under this Section by the Minister of Finance for Fiscal Year 2021-2022 - Also, previously we published several blogs articles on Housing pre & post pandemic crisis and other section of Income Tax on Housing finance and vice versa. Our author Yusuf Bhandarkar has written several articles on Housing Scheme in the past you can review the same in chronological order which suits you understanding various section on housing benefits!!
Finance Minister of India Smt. Nirmala Sitharaman, on February 1, 2021, said that the additional benefit of the portion granted when paying the component interest of home loans will be extended to March 31, 2022. In last year's budget, the FM extended this period by one year to March 31, 2021. “In the July 2019 budget, I made an additional interest deduction of 1.5 billion rupees available for loans due as of Buying an affordable home suggesting extending the eligibility of this deduction for an additional year through March 31, 2022.The additional deduction of 1.5 billion rupees is therefore available for loans taken out by March 31, 2022 for the purchase of an affordable house, "Sitharaman said on February 1, 2021 during her speech on the 2021 budget.
Affordable housing will get a boost from the extension of tax vacation and Section 80EEA through March 31, 2022. If you look at last year's experience, affordable housing will attract more buyers as people want to secure their lives by owning a home.The demand for affordable housing is higher than ever. Section 80EEA was introduced in the 2019 budget and helps first-time home buyers save an additional Rs 1.50 lakhs per annum on home loan interest payments in excess of the Rs 2 lakhs allowance allowed in Section 24 (b) to be deducted from the purchase of Housing units valued at up to Rs 45 lakhs. Did you know that first time buyers in India receive additional income tax deductions when buying the property with the help of home loans?Special provisions were made in the Income Tax Act, 1961, to provide first-time home buyers an exemption for affordable home purchases that goes beyond the benefits of other categories of buyers.These include the benefits of Section 80EE and Section 80EEA.
In this article, we'll go in depth to Section 80EEA, answer all of the questions about the benefits, eligibility, Withdrawal Limit, and more that are offered to first-time home buyers in this section. Housing for All and the Introduction of Section 80EEA in its first term, 2014 began, the NDA government, led by Prime Minister Narendra Modi, launched its "Living for All by 2022" program. To achieve this ambitious goal, the central government launched various measures to encourage first-time home buyers.The introduction of Section 80EEA in 2019 was a step in that direction. In order to meet the Housing for All goal by 2020, the government extended the Section 80EEA interest deduction for loans taken out between April 1, 2019 and March 31, 2021.What is Section 80EEA of the Income Tax Act? Finance Minister Nirmala Sitharaman introduced Section 80EEA in the 2019 Union Budget with the aim of boosting the center's'Housing for All by 2022' program by offering additional tax benefits. about buying affordable homes.“When calculating the total income of an appraiser, being a person who is not eligible to claim the deduction under Section 80EE, will be deducted, in accordance with and subject to the provisions of this section, interest payable on a loan taken by him from any financial institution for the purpose of acquiring residential property, ”says Section 80EEA. What is the amount of deduction available under Section 80EEA? According to the provisions of the section, home buyers can save an additional Rs 1.50 lakhs per year towards interest paid on home loans, in addition to the Rs 2 lakhs they already save under Section 24 (b) .
“Interest paid on home loans a deduction to the extent of Rs 2 lakhs is allowed with respect to self-occupied property.To provide an additional benefit, I propose to allow an additional deduction of Rs 1.5 lakhs for interest paid on loans taken up to March 31, 2020, to purchase an affordable home worth up to Rs 45 lakhs.Therefore, a person who buys an affordable home will now get an enhanced interest deduction of up to Rs 3.5 lakhs,”said Sitharaman in her 2019 budget speech.
The period covered was extended for another year in the 2020. budget. Note here that all categories of buyers may request a deduction from interest payments on home loans under Section 24(b) Rs 1.50 lakhs against interest payment under Section 80EEA are above this limit. Further expansion of Section 80EEA in budget 2021 expected. Care is taken given the economic slowdown caused by the corona virus. Income tax deductions for interest paid on equity credit line Who is eligible to assert deduction underneath Section 80EEA? The Finance Bill, 2019, additional given the eligibility to avail of advantages underneath Section 80EEA. Who will claim the rebate? Only first-time home consumers will claim edges underneath this Section, because it specifies that at the time of grant of the house loan the recipient mustn't own any residential property. What is the deduction for? Deduction may be claimed against equity credit line interest payment only.
What is the deduction limit? The deduction limit is Rs 1.50 lakhs per year. What is the amount covered? Borrowers whose home loans are sanctioned between Gregorian calendar month 1, 2019 and March 31, 2021, will claim benefits. Which class of customer will apply? Only individual consumers will claim deductions underneath this section. this implies companies, Hindu undivided families, etc., cannot claim benefits. What ought to be the supply of the house loan? The buyer needs to take the house loan from a financial organisation (banks housing finance companies) and not from family members, relatives or friends. What ought to be the property value? The stamp worth of the property mustn't exceed Rs forty five lakhs. What variety of property is covered? Buyers of residential house property will claim the benefit. it's conjointly given that the loan must be borrowed for getting the property and not reconstruction, repair, maintenance, and so forth. What is the limitation? If a customer is saying deductions underneath Section 80EE, he cannot claim deductions under Section 80EEA. Can NRIs claim deduction underneath Section 80EEA? Since the law doesn't specify whether or not a first-time customer needs to be a resident Indian to assert deduction, it's been understood by tax consultants that even non-residents claim deductions underneath Section 80EEA. What are the conditions to assert deduction underneath Section 80EEA? What is the world limit of unit to assert deduction underneath Section 80EEA? According to the Finance Bill, if the unit is found in a very metropolitan city, its size mustn't exceed 645 square measure or 660 sq metres. For units in the other city, the scale has been restricted at 968 sq ft or 990 sq metres. Which cities are thought-about metropolitan cities underneath Section 80EEA? Cities that are thought-about metropolitan for this purpose are Bengaluru, Chennai, Delhi, Faridabad, Ghaziabad, bigger Noida, Gurugram, Hyderabad, Kolkata, and Noida. Can deductions be claimed underneath Section 80EEA, if the property isn't self-occupied ? Section 80EEA doesn't specify if the property should be self-occupied, to hunt the tax break. This conjointly permits consumers who live in rented accommodations to assert deductions whereas also claiming HRA edges underneath Section 80GG. Can joint house owners claim deductions underneath Section 80EEA separately? In case the joint house owners are co-borrowers, they will each claim Rs 1.50 lakhs every as deductions underneath this Section, provided they meet all the opposite conditions. What is the distinction between Section 80EEA and Section 24(b)? Buyers will claim deductions underneath both, Section 24(b) and Section 80EEA, and enhance their total non-taxable financial gain to Rs 3.50 lakhs, if they meet the eligibility criteria. However, deductions under Section 80EEA can solely be claimed when exhausting the Rs 2-lakh limit under Section 24(b). Category Section 24(b) Section 80EEA Possession should Not needed Loan supply Banks or personal sources solely banks Deduction limit Rs a pair of lakhs or entire interest* Rs 1.50 lakhs Property worth No specification Rs forty five lakhs Loan amount Loans taken when Gregorian calendar month 1, 1999 April 1, 2019 to March 31, 2021
Buyer class All home consumers First-time individual home buyers Lock-in period ** None*
While a rebate of Rs in a pair of lakhs is allowed for self-occupied property, the complete interest is allowed as deduction just in case of let-out property. **Section 80C specifies that consumers mustn't sell the property for 5 years, to assert deductions. this can be referred to as the lock-in period. What is the distinction between Section 80EEA and Section 80EE? First-time consumers claiming deductions underneath Section 80EE cannot claim deductions under Section 80EEA. this can be specifically mentioned within the law. Particulars Section 80EE Section 80EEA Property worth Up to Rs fifty lakhs Up to Rs forty five lakhs Loan quantity Up to Rs thirty five lakhs Not given Loan amount coated Gregorian calendar month 1, 2016 to March 31, 2017 April 1, 2019 to March 31, 2021 Maximum rebate Rs 50,000 Rs 1.50 lakhs Lock-in amount None None How home consumers will use Section 80EEA to assert most deduction? Since Section 80EEA has been introduced to assist the middle-income cluster to have a home by means of upper financial support, allow us to see what quantity of his financial gain an individual will create non-taxable, if he on to buy for his 1st home today.
Tax calculation example
Harshad Modi works at an IT company in Noida and his annual salary package is Rs 15 lakhs. Let us assume that he is not enjoying any tax deductions so far. At the current tax slab, his total taxable income would be:
Rs 15 lakhs – Rs 40,000 (This is the standard deduction all tax payers in India enjoy) = Rs 14.60 lakhs - Modi falls in the Rs 12.5 lakhs-Rs 15 lakhs tax bracket. So, the highest rate at which his income will be taxed is 30%.
Split of Rs 14.60 lakhs for tax calculations
Rs 2.5 lakhs (@0%) = 0
Rs 2.5 lakhs (@5%) = Rs 12,500
Rs 5 lakhs (@20%) = Rs 1,00,000
Rs 4.6 lakhs (@30%) = Rs 1,38,000
Total = Rs 2,50,500
+ cess (@4%) = Rs 10,020
Modi’s total tax outgo = Rs 2,60,520
Now, let us assume that Modi invests in his maiden property to lower his tax outgo. He is buying a property worth Rs 45 lakhs, for which he is taking 80% of the property value (Rs 36 lakh) as loan from a scheduled bank at an 8% interest rate.
Key numbers
Loan amount: Rs 36 lakhs
Tenure: 15 years
Interest rate: 8%
This would lead to:
EMI of Rs 34,403
Total interest (in 15 years): Rs 25,92,624
Total payable (in 15 years): Rs 61,90,624
If Modi took the loan in December 2019, through 2020 (the first year of the loan tenure) he would be paying:
Rs 1,29,522 as home loan principal
Rs 2,83,319 as home loan interest
Under Section 80C, which offers rebate against specific investments, including home loan principal, Modi can get Rs 1,29,522 from his income made tax-free (the upper limit under this Section is Rs 1.50 lakhs in a year). Under Section 24(b), Khanna can claim Rs 2 lakhs as deduction against the interest paid.
Now, under Section 80EEA, Modi can also claim the remaining Rs 83,319 as deduction from the overall limit of Rs 1.50 lakhs. After applying all these deductions, here is the breakup of Modi’s total taxable income: Rs 15 lakh – Rs 40,000 (Standard deduction) = Rs 14.60 lakh
Deduction under Section 80C: Rs 1,29,522
Deduction under Section 24(b): Rs 2,00,000
Deduction under Section 80EEA: Rs 83,319
Total deductions: Rs 4,12,841
Total taxable income: Rs 14,60,000 – Rs 4,12,841 = Rs 10,47,159
Modi still falls in the category of over Rs 10 lakh taxable income, so the highest rate at which his income is taxed remains 30%, but the amount to be taxed at 30% has come down significantly. Here is the split of his income for tax calculations:
Rs 2.5 lakhs (@0%) = 0
Rs 2.5 lakhs (@5%) = Rs 12,500
Rs 5 lakhs (@20%) = Rs 1,00,000
Rs 47,159 (@30%) = Rs 14,148
Total tax: Rs 1,26,648
+ cess at 4% = Rs 5,066
Total tax outgo: Rs 1,31,714
Total savings as against the earlier outgo:
Rs 2,60,520 – Rs 1,31,714 = Rs 1,28,806
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