Budget 2019-20 – Tax Incentive for affordable housing under Sec.80EE

A full-fledged budget was presented by Finance Minister on 5th July 2019. During this budget, there is a certain additional tax incentive for affordable housing were proposed. Let us see the benefits.

Tax Incentive for affordable housing

A new section under Sec.80EE of the IT Act has been inserted in the Union Budget 2019-2020 to provide an impetus to affordable housing.  An additional tax deduction of Rs.1,50,000 has been provided on home loan interest for residential property from any financial institution subject to certain conditions. Let us see the details.

Definition of Affordable Housing

# A residential unit with carpet area less than or equal to 60 square meters in metropolitan cities or 90 square meter in cities or towns other than metropolitan cities of Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region).

# Stamp duty value (Registration Value) of the property should not exceed 45 Lakhs.

Budget 2019-20 – Tax Incentive for affordable housing

  1. The loan was sanctioned between 1st April 2019 to 31st March 2020.
  2. Stamp duty value of the property should not exceed Rs.45 Lakhs.
  3. The taxpayer should not own any other residential property on the date of loan sanction.
  4. This tax benefit is applicable from 1st April 2020 (AY 2020-21).
  5. If this additional deduction of Rs.1.5L is claimed under the new section it cannot be claimed for tax benefit elsewhere.
  6. The total interest deduction is now Rs. 3.5 lakh.

Rs 1.5 lakh Additional Income Tax deduction on affordable home loans under Sec.80EE

Now let us discuss this additional tax benefits. Let me explain you the detailed tax benefits one can avail once you have home loan.

# Section 80C

Under Sec.80C, you can avail the deduction with respect to the principal you pay towards your home loan. The maximum benefit under this is Rs.1.5 lakh.

# Section 24

The benefits for home loan interest payments can be claimed under Sec.24. You can claim the home loan interest benefits of up to Rs. 2,00,000 u/s 24B.

# Section 80EE

An individual can now claim up to Rs 1.5 lakh under Section 80EE from FY 2019-20 onwards, subject to below conditions;

  • The home loan should have been sanctioned between 1st April 2019 to 31st March 2020.
  • The Stamp duty value of the property should not exceed 45 Lakhs.
  • The taxpayer should not own any other residential property on the date of loan sanction.
  • This tax benefit will be available from 1st April 2020 and till the end of the home loan tenure.

Hence, now the total deduction on home loan is Rs.3,50,000 (Rs.2,00,000 under Sec.24) and Rs.1.50,000 under Sec.80EE.

24 Comments

  1. Dear Sir, Last year purchased house in Bangalore and loan approved from SBI on February 2019, and flat measurement is 1382 square feet and the loan amount is 32 lakhs, which crosses 2.20 lakhs interest, and planning to rent it and stay in rent house. Could you please let me know how tax works

    Reply
    • Dear Pradeep,
      It depends on many other aspects. I can’t guide BLINDLY without knowing much about your financial life.

      Reply
  2. If house gifted to me by parents and I bought new house then I am eligible it rebate.

    Reply
  3. Hi,
    The new rule says “Affordable house upto Rs 45 lakh in value. ”

    You can never reach an interest value of 3.5 L with that.
    Max loan is 80% for a house of 45L in value. So assuming around 8.55% SBI home loan interest rate , for 10, 20, 30 years, you will see the interest will be just above 3 L and never will touch 3.5 L 🙂 No body can claim 3.5L unless they change the norms to make it “a loan of 45 L”.

    Reply
    • Dear Vidya,
      It may be. However, those who MADLY buy just for the sake of tax saving can go to any extent to get the benefits. The whole real estate industry and Banking industry desperately looking for such real estate BUYERS 🙂

      Reply
  4. Dear Sir, By definition affordable homes are those with carpet area of less 645sqft in Metro cities like Bangalore. Which are most likely 1 BHK homes, is my understanding correct.? Should I buy 1BHK to avail this benefit?

    If I buy 30×20 site and build a duplex, will that be eligible ?

    Reply
    • Dear Vishwanath,
      It is carpet area that matters. Hence, if you build duplex, then such house are not eligible.

      Reply
  5. I mean, if I buy my first house but given to rent & i also stay on rent in other place, can i claim this 3.5L?

    Reply
  6. I have purchased a resale home in April 2019 at Rs.43,50,000/- + Stamp duty + Registration fees = 46,43,000/-.

    What is the definition of Stamp duty value , is it includes Stamp Duty fees and Registration fess ?
    or excluding stamp duty fees and Registration fees?

    Please clarify.

    Regards,
    Chandra Mohan

    Reply
      • Thanks for your valuable advice, that means I am eligible to get this benefit.

        Reply
  7. I am selling my existing house and want to buy new house by year end. I assume I will be eligible as I will not be having any house at the time of buying new home. Please clarify. Thanks in advance

    Reply
  8. dear sir,
    suppose that if my loan sanctioned at December 2018 and passion will be in dcember 19 for flat so this 3.5lakh interest scheme will be applicable.

    Reply
    • Dear Indrajeet,
      It is the sale deed date, that is considered for this eligibility.

      Reply
      • But Sir, in budget lines they are saying only loans sanctioned between april19 to march 20 is only eligible for this scheme under 45lakh.
        and i have taken loan from 2017 december.
        so may i eligble for this 3.5 lakh interest benefits?

        Reply
        • and my whole registered cost is 4380000 exclusive GST and stamp with in 9000 carpet area in non metro.

          Reply
          • its 900 sqft carpet area

            Reply
            • Dear Indrajeet,
              Along with carpet area, check the other eligibility.

              Reply
  9. Is there any condition that it should be only self occupied?

    Reply
    • Dear Shas,
      Section 80EE is applicable for those who does not have a property earlier. Hence, if you have already one self-occupied property, then you are not eligible to claim the deduction under Sec.80EE for another house property.

      Reply

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