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Owning a home is a long-term goal for many people. Today, the attractive rates on housing loans<\/a> are making it much easier for people to buy their dream home hassle-free. Through these loans, individuals can easily continue paying monthly EMIs<\/a> and eliminate the burden of exhausting all of their savings in one transaction.<\/p>\n\n\n\n The government also recognizes that many individuals are moving towards making investments in real estate, which is why it provides tax benefits linked to home loans.<\/p>\n\n\n\n With the introduction of home loan tax benefits and home loan tax exemptions, those buying a home can avail tax benefits while filing their income tax returns.<\/p>\n\n\n\n This blog takes you through what 80EEA is and the tax benefits you can claim under it for an under-construction property. <\/p>\n\n\n\n Section 80EE allows a deduction of Rs. 50,000 for interest paid on a home loan by a first-time home buyer. This interest on home loan<\/a> deduction is for loans sanctioned by financial institutions between 1st April 2016 and 31st March 2017. The amount of Rs. 50,000 could be directly reduced from the income declared in the income tax returns as per the Section 80EE deduction. The other conditions of the Section 80EE deduction were that the value of the house should be less than Rs. 50 lakh and the loan value should not be more than Rs. 35 lakh.<\/p>\n\n\n\n Those who have taken a home loan in FY 16-17 and fulfill the other conditions of this section can claim the Section 80EE deduction every year until they repay their loan.<\/p>\n\n\n\n Also, read – Token money meaning & importance in property deals<\/a><\/p>\n\n\n\n After learning about Section 80EE, it is vital to understand what 80EEA is. Section 80EEA was introduced as part of the Income Tax Act in the budget session of 2019. The objective of this section was to make housing loans more affordable by allowing tax benefits through interest on home loan deduction. The maximum home loan interest tax benefit available under Section 80EEA is Rs. 1,50,000.<\/p>\n\n\n\n Also, read – Difference between pledge, hypothecation, and mortgage<\/a><\/p>\n\n\n\n Here\u2019s a step-by-step guide to claim 80EEA deduction:<\/p>\n\n\n\n Also, read – Can I claim home loan interest tax benefits before possession?<\/a><\/p>\n\n\n\n Pre-construction interest refers to the interest paid on a home loan when the property is under construction. It starts from the date of borrowing and goes on until possession. The interest cannot be claimed as a tax deduction in the same year. It is accumulated and allowed as a deduction only after possession is obtained. <\/p>\n\n\n\n The total pre-construction interest can be claimed in five equal annual installments, starting from the year of completion. It is eligible for deduction under Section 24(b). If applicable, the excess interest can also be claimed under Section 80EEA, subject to prescribed limits.<\/p>\n\n\n\n Also, read – GPRA Complex – How to Apply for GPRA Quarters via eSampada and e-Awas?<\/a><\/p>\n\n\n\n Sections 80EE, 80EEA, and 24 of the Income Tax Act provide different types of home loan tax benefits. Section 80EE provides tax benefits to first-time buyers. The limit is up to Rs. 50,000, and the loan must have been granted between 1st April 2016 and 31st March 2017. Section 80EEA deductions apply to interest paid on loans granted between 1st April 2019 and 31st March 2022. The limit is up to Rs. 1.5 lakh for affordable housing loans. Section 24(b) allows up to Rs. 2 lakh deduction on home loan interest for a self-occupied house. <\/p>\n\n\n\n Also, read – Home Loan Settlement Process: Key Steps & Tips<\/a><\/p>\n\n\n\n House loan tax exemption of the interest portion of a home loan can also be claimed through Section 24 of the Income Tax Act up to a limit of Rs. 2 lakh. However, the home loan tax benefit under Section 24 can only be claimed when the construction of the property has been completed.<\/p>\n\n\n\n From the time the home loan was taken till the time the construction of the property is complete, the interest on the loan cannot be claimed directly as a deduction under Section 24 and is called the pre-construction interest. Such pre-construction interest on home loan deduction can be claimed under Section 24 in five equal installments after the completion of the construction. However, a homeowner can claim the benefit of Section 80EEA even during the construction phase.<\/p>\n\n\n\n Therefore, if a homeowner is eligible for deduction under Section 80EEA, it would be beneficial to first exhaust the limits available under this Section and then claim the balance pre-construction interest as a deduction under Section 24 in five equal installments.<\/p>\n\n\n\n For example, if the interest is Rs. 1,50,000 for the first two years during construction and Rs. 2 lakh from year 3, here is how Section 80EEA can help:<\/p>\n\n\n\n <\/p>\n\n\n\nWhat is Section 80EE?<\/strong><\/h2>\n\n\n\n
What is Section 80EEA?<\/strong><\/h2>\n\n\n\n
Eligibility criteria for Section 80EEA<\/strong><\/h3>\n\n\n\n
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Other features of Section 80EEA<\/strong><\/h3>\n\n\n\n
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How to claim 80EEA deduction on an under-construction property?<\/strong><\/h2>\n\n\n\n
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Pre-construction interest and tax benefits<\/strong><\/h2>\n\n\n\n
Comparison between Section 80EE, 80EEA, and Section 24<\/strong><\/h2>\n\n\n\n
Home loan tax benefits for under-construction properties<\/strong><\/h2>\n\n\n\n