Tax Benefits For House Owners

There are clear tax advantages to taking out a mortgage to buy a property, including a deduction for the interest you paid and the principal you repaid. Along with this, starting with the financial year 2019–20, or the assessment year 2020–21, you can additionally reduce your tax liability by taking an extra 1,50,000–dollar deduction. This deduction will begin with the current assessment year (I-T Returns to be filed in this year). If the total deduction under this provision does not exceed 1,50,000, it may be claimed throughout the duration of the mortgage. Only purchasers of affordable low-cost homes are eligible for this deduction.

What does this 80EEA deduction entail?

For the purpose of interest repayment on mortgage loans obtained from financial institutions and banks, this additional deduction is possible.

For loans taken out from friends and family, the interest repayment deduction against income from real estate is allowed; however, this is not the case for this deduction. In this instance, a bank or financial institution must be used to obtain the loan.

A comparable deduction of 50,000 is also available under Section 80EE of the Income Tax Act, but you can only take advantage of it if you took out a home loan during the 2016–17 fiscal year. You are ineligible to claim the deduction under Section 80EE if you have taken it or are otherwise eligible to take it.

Conditions for Deduction Eligibility Under Section 80EEA

• Only individuals are eligible for this deduction; HUFs and businesses are NOT
• Your purchase agreement value for the home cannot be higher than $45,000,000.
• A mortgage loan must be used to fund the house.
• Such a mortgage must be taken out during the 2019–20 or 2020–21 fiscal years (purchase agreement date is not relevant)
• You cannot own any other residential property as of the date this mortgage is approved.
• This deduction is available for use in the assessment years 2020–21 and thereafter.
• If you have a home loan with a total interest repayment of, say, $20,000, the amount against which this deduction is claimed cannot be claimed as a deduction against any other section.
• Income from real estate and deduction under Section 80EEA
• This deduction should be taken out of your gross income, not your income from rental property.
• Income from residential property must be subtracted from the interest deduction under Section 24.
• You can claim the un-consumed portion under Section 80EEA if the complete amount of interest repaid is not consumed when claiming a deduction under Section 24 of the Act.
• If you share ownership of a residence and both co-owners have taken out mortgage loans, each co-owner may individually claim a deduction up to a maximum of 1,50,000.