The Income Tax Act provides various tax-saving provisions that make homeownership more affordable. Even with a home loan, borrowers can claim deductions under Sections 80EE and 80EEA, helping reduce their financial burden.

Both these sections allow homebuyers to deduct interest paid on home loans, but they differ in eligibility criteria and benefits.

Understanding these differences is essential for maximising tax savings. Let’s compare 80EE vs 80EEA to explore their key features and eligibility requirements.

Understanding Section 80EE

Homeowners can claim tax deductions under Section 80EE on the interest paid towards their home loan. This benefit is exclusively available to first-time homebuyers and allows deductions of up to INR 50,000 per financial year.

This deduction is over and above the benefits available under Section 24(b) (deduction on home loan interest up to INR 2 lakhs for self-occupied properties) and Section 80C (deduction on principal repayment up to INR 1.5 lakh).

Eligibility to Claim the 80EE Tax Deduction

To qualify for tax deductions under Section 80EE, homebuyers must meet the following criteria:

• Only individuals can claim this deduction. It is not available to Hindu Undivided Families (HUFs), Associations of Persons (AOPs), trusts, or companies.
• The applicant must not own any other residential property on the date the loan is sanctioned.
• The property’s value must not exceed INR 50 lakhs.
• The loan amount must not exceed INR 35 lakhs.
• The deduction is only applicable for home loans sanctioned between April 1, 2016, and March 31, 2017.

Understanding Section 80EEA

Section 80EEA provides an additional tax deduction of up to INR 1.5 lakh on home loan interest payments for first-time homebuyers in India. This provision was introduced as part of the government’s “Housing for All” initiative, aiming to make homeownership more accessible and affordable.

Eligibility to Claim the 80EEA Tax Deduction

To qualify for tax deductions under Section 80EEA, homebuyers must meet the following conditions:

• The home loan must be from a financial institution or housing finance company.
• The stamp duty value of the property must not exceed INR 45 lakhs.
• The carpet area of the property must not exceed 60 sqm in metro cities and 90 sqm in non-metro cities.
• The loan must be sanctioned between April 1, 2019, and March 31, 2020.
• The applicant must not own any other residential property at the time of loan sanction.
• Only individuals can claim this deduction. HUFs, AOPs, firms, or companies are not eligible.

Key Differences Between Sections 80EE and 80EEA

Can I Claim Both 80EE and 80EEA Deductions?

No, buyers cannot claim deductions under both Sections 80EE and 80EEA simultaneously. Eligibility depends on when the home loan was sanctioned. If an applicant qualifies for one section, they cannot claim the other. However, buyers can combine either Section 80EE or Section 80EEA with Section 24(b).

Key Terms to Know Before Filing Tax Benefits Under Sections 80EE and 80EEA

Before filing tax deductions under Sections 80EE or 80EEA, homeowners must understand certain key terms:

• Carpet Area: The total usable area within the walls of a house, including rooms, the kitchen, and bathrooms. It does not include balconies, common areas, elevators, or staircases.
• Carpet Area: The total usable area within the walls of a house, including rooms, the kitchen, and bathrooms. It does not include balconies, common areas, elevators, or staircases.
• Gross Total Income: The sum of an individual’s income from all sources (salary, business, capital gains, etc.). Lenders use this figure to assess loan eligibility.
• Stamp Duty Value: The assessed property value, determined by the state government for taxation purposes. This is different from the market price.
• Annual Value: The estimated yearly rental income a property can generate, based on government valuation and fair market rent. It is used in income tax calculations.
• Loan to Value (LTV) Ratio: A percentage that compares the loan amount to the property's market value. A higher LTV means a higher loan compared to the property's worth, which can affect interest rates and loan approvals.

Conclusion

When purchasing a house, it’s vital to understand the difference between Sections 80EE and 80EEA to maximise tax benefits. These deductions help reduce overall tax liability, easing the financial burden of homeownership. However, meeting the eligibility criteria is essential to claim these benefits.

If you’re considering buying your first home, SMFG Grihashakti is here to help. We offer home loans of up to INR 1 crore* at attractive interest rates starting at 10%* per annum. Check your eligibility and apply online today.