The Government of India under the ‘Housing for all’ program has taken various initiatives. The scheme aims to provides affordable housing facility for all Indian Citizens. Affordable housing scheme is targeted towards the mass middle class population of the country whose income ranges below the average household income in the country. Under affordable housing, the government facilitates lower interest rate home loans to public via banks and financial institutions.
The scheme was launched during June 2015 and has been extended further till 31st March 2022. Government provides tax benefit on the interest paid under Section 80 EEA of the Income Tax Act for all affordable housing loan beneficiaries. 80 EEA tax benefit is offered to encourage 1st time home buyers from the middle-class segment.
Only individuals (no firms/companies/HUFs) can take tax benefit under 80 EEA. Income tax deduction of up to Rs. 1,50,000/- paid towards affordable housing loan interest can be availed under 80 EEA. This deduction is over and above the Rs. 2,00,000/- deduction under Section 24B. 80 EEA benefits are available till you have repaid the affordable housing loan.
Condition for 80 EEA deduction for affordable housing:
- Carpet area of house property must not exceed 645 square feet in Metro cities (including Bangalore & Hyderabad) and 968 square feet in other cities.
- Property valuation must be maximum up to Rs. 45,00,000/- as per registered document/stamp duty document.
- Home loan must be taken for residential house from a bank or housing finance company.
- Home loan must have been sanctioned between 1st April 2019 to 31st March 2022. You should not own any residential home as on sanction date for affordable housing.
- Note for claiming tax benefit under 80 EEA, your registered agreement must show the carpet area.
As taxpayers can claim both 80 EEA benefit and Sec 24B tax benefit, a total deduction of Rs 3.5 Lakh can be taken if someone meets both the criteria. That means you can buy a second house even after you have bought your home under affordable housing and government give tax benefit on both up to 3.5 lakh.