A large number of middle-class Indian people who live on rent, cherish the dream of having a house of their own. But with the tight income slab, things do not get easier. However, with the use of Section 80EEA of the Income Tax Act 1961, someone who is buying the house for the first time can get a tax deduction of up to Rs 1.5 lakh. While there are terms and conditions to it, the condition offers significant relief to prospective buyers looking for a house on loan.
Section 80EEA joins hands with Section 24 (B) that gives a tax deduction of Rs 2 lakh against the yearly interests paid for a housing loan.
Important Thing to Know About Section 80EEA
Now that we have understood what Section 88EEA is, it is important to look at the eligibility criteria it offers to know more about it.
- You can only avail of the deduction if you are buying a house on loan for the first time.
- The stamp value of the house should not be more than Rs 45 lakh.
- The tax rebate will only be made if you purchase the house between April 1, 2019, and March 31, 2022.
- If a person is eligible for tax deduction under Section 80EE, then he cannot make a claim for Section 80EEA.
- The maximum tax deduction under Section 80EEA is Rs 1.5 lakh. If you add Section 24 (B), the total tax deduction will amount to Rs 3.5 lakh.
Benefits of Section 80EEA of Income Tax Act, 1961
There are several advantages of having this section in the Income Tax Act, 1961. Some of them are as follows:
Savings for the New Buyer
If you are an individual who is buying a house for the first time, then this section will work wonders for you. In the ITR you file every year, you will be able to claim a deduction of Rs 1.5 lakh which is a significant amount. So, if your income is Rs 10 lakh, where up to Rs 5 lakh is the tax exemption limit, you will have to pay tax only on Rs 3.5 lakh. And even in this Rs3.5 lakh, you can use Section 24 (B) with its exemption limit of Rs 2 lakh. So the taxation computed on your income for this year would only be Rs 1.5 lakh.
Encouragement to Invest in Real Estate
The real estate business is still blooming in India. The property is increasing with soaring rates, each passing year. In a few years’ time, the price of a regular 2 BHK would be sky-high. In such a situation, making investments in real estate would be an ideal thing to do. But as much middle-class people have to resort to home loans, they have to pay a higher amount in the long run for the house they bought. But with a tax exemption of Rs 1.5 lakh, there would be some encouragement among them to invest in real estate.
Exclusively for Middle-Class Population
With the maximum stamp value of Rs 45 lakh, it is a clear sign that this tax deduction facility is exclusively reserved for the middle-class population. Those who can afford houses of higher value can easily do without this tax exemption. But the middle-class population gets some relief with the availability of Section 80EEA in the Income Tax Act, 1961.
An important thing to keep in mind about this tax deduction section is that only individuals are eligible for its benefits. So partnerships of firms, associations of persons, and private or public limited companies and their taxpayers are not eligible to take advantage of Section 80EEA.