The government added a new section 80EEA to the Income Tax Act in Budget 2019. Provision has been made under this section that for the first time home buyers will be given the benefit of additional tax deduction of up to Rs 1.5 lakh on the interest payment of home loan. This relief has been extended for another year.
Tax Saving by Home Loan: There were no major announcements in the case of salaried class taxpayers in the Budget 2021 presented on February 1, but a relief was given. It was a relief for those taking home loans to buy a house for the first time. Finance Minister Nirmala Sitharaman announced in his budget speech that it is proposed to extend the tax deduction by one more year up to Rs 1.5 lakh on the home loan interest payment for the purchase of cheap houses. That is, now taxpayers taking home for the first time on loan can avail this additional deduction on home loan taken till 31 March 2022.
Section 80EEA
It is noteworthy that the government had added a new section 80EEA in the Income Tax Act in the Budget 2019. Provision has been made under this section that for the first time home buyers will be given the benefit of additional tax deduction of up to Rs 1.5 lakh on the interest payment of the home loan. It was then said that only those people who took a loan between April 2019 and March 2020 would be able to take advantage of it. After this, when the budget 2020 came, the government extended this deadline till March 2021 and now this relief has been extended again for another one year in the budget 2021.
How much income from home loan tax free
By March 2022, individual taxpayers taking home loans who are buying a house for the first time will be able to take this advantage and claim deduction till the loan is repaid. Salaried class income tax payers, including the relief provided under section 80EEA, can make income up to Rs. 10.50 lakh annually tax free through one home loan alone. How, let’s understand from a chart and its details…
See calculation in the chart
Flat standard deduction is directly deducted from the total income of the taxpayer. Standard deduction was reintroduced in Budget 2018 and its limit was increased from 40000 to 50000 rupees in Budget 2019. That is, there is a provision for flat standard deduction of 50 thousand rupees for every salaried class taxpayer.
Tax benefit on home loan principal
There is a provision for a maximum tax deduction of up to Rs 1.5 lakh per annum under Section 80C of Income Tax Act 1961 on Principal Amount of Home Loan. There is a condition with this that the house for which the home loan has been taken and the deduction is being claimed cannot be sold for 5 years after the purchase. If the owner did so, then all the old deductions would be added to the owner’s income in the year of sale of the house.
Interest rebate
Under section 24 of the Income Tax Act, 1961, a taxpayer can claim a maximum tax deduction of up to Rs 2 lakh on home loan interest. For the first time homeowners, can claim additional tax deduction up to Rs 1.5 lakh on home loan interest under section 80EEA of the Income Tax Act. But some conditions must be met.
What are the terms
Under section 80EEA, only taxpayers who take home for the first time can claim deduction. The loan should be taken after April 2019. There should be no residential property in the name of the taxpayer till the date the loan is given. The stamp duty value of the house to be purchased should not exceed Rs 45 lakh. The carpet area of the residential property should not exceed 645 sq ft in other metro cities including Delhi NCR and 968 sq ft in other cities.
Thus a total deduction of up to Rs 3.5 lakh on interest
In this way, home loan buyers for the first time, a total of Rs 3.5 lakh on the interest payment of a home loan, including an additional deduction of up to Rs 1.5 lakh on interest payment under section 80EEA and up to Rs 2 lakh under section 24. Tax deduction up to Rs.
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