The benefit of additional deduction on interest paid for home loans taken to purchase affordable houses has been extended to March 31, 2022. In the July 2019 Budget, the Finance Minister announced an additional deduction of interest by introducing a new section 80EEA, amounting to Rs 1.5 lakh, for any loan taken to purchase an affordable house. Real estate experts welcomed the government’s proposal.
“The government has continued its focus on the affordable housing segment by extending tax benefits for another year. Amid the prolonged pandemic scenario, this extension was needed to support the latent housing demand in the country,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India
What is Section 80EEA?
An individual can claim a deduction against interest payments on home loan of up to Rs 1,50,000 under Section 80EEA, provided she owns no other house property as on the date of the sanction of the loan.
This deduction is over and above the deduction of Rs 2 lakh for interest payments available under Section 24(b) of the Income Tax Act, 1961. The other criterion to claim the benefit under this section is that the stamp duty value of the house property should be less than or equal to Rs 45 lakh.
What is affordable housing?
According to the income tax department, an affordable house is one where the carpet area does not exceed 60 square metres (645 sq ft) in metropolitan cities such as Delhi, Mumbai, Bengaluru, Chennai, Hyderabad, Kolkata and not exceeding 90 square metres (968 sq ft) in other cities or towns.
Contrary to what many real estate sector experts had been demanding, the definition of an affordable loan has not been increased in this year’s Budget.
