Budget 2019 – New deduction u/s 80EEA proposed to claim deduction of interest paid on housing loan

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  • Last Updated on 8 April, 2021

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The Finance Bill, 2019 has proposed a new deduction u/s 80EEA for interest paid on housing loan in order to incentivize the purchase of affordable housing. Deduction under section 80EEA has been proposed by the Finance (No. 2) Bill, 2019 to provide for deduction with respect to interest on housing loan acquired on or after April 1, 2019. The amount of deduction is over and above the limit available under section 24(b) with respect to interest which is Rs. 2,00,000.
 
The objective of this deduction is to provide an impetus to the ‘Housing for all’ objective of the Government and to enable the home buyers to have low-cost funds at their disposal.
As per the proposed section, deduction up to Rs. 1,50,000 shall be allowed to an individual for the interest paid on loan taken for acquisition of a residential house property provided he does not claim deduction with respect to such interest under any other provision of the Act.
 
The salient features of section 80EEA are given below:
 
a) Deduction is available to  individual taxpayers only.
 
b) Interest is payable on loan taken from any financial institution for the purpose of acquisition of a residential house property.
 
c) Maximum amount of deduction permissible is Rs.1,50,000 for the assessment year 2020-21 and subsequent assessment years.
 
d) Loan should be sanctioned by the financial institution during the period April 01, 2019 to March 31, 2020
 
e) Stamp duty value of the house property should not exceed Rs. 45 lakhs
 
f) The assessee should not own any residential house property on the date of sanction of loan.
 
g) The assessee shall not claim benefit with respect of such interest under any other provision of the Act such as Section 80EE or Section 24(b).
 
It must be noted that in order to claim the benefit of Section 80EEB, all the conditions stated above are to be satisfied cumulatively.
 
The term ‘financial institution’ would mean a banking company to which the Banking Regulation Act, 1949 applies or a banking Institution referred to in section 51 of that Act or a housing finance company. The ‘housing finance company’ means a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes.
 
 

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