If you purchase an affordable home, you can claim deduction under Section 80C, Section 24 and Section 80EEA. Let’s analyze how you can save income tax by purchasing an affordable home.

As per section 80EEA, the interest on loan taken for an affordable home can be claimed as a deduction with a limit of INR 1.5 lakhs.

As per Section 80EEA, the home loan should be taken

  • for an individual

  • between April 1, 2019 to March 31, 2020

  • from a financial institution or a housing finance company

Income Tax Liability
section 80EEA income tax

Section 80EEA – Conditions for eligibility

  • The house property should have stamp duty value of INR 45 lakhs or less

  • The taxpayer should not own any other house property

  • The taxpayer should not claim deduction under Section 80EE

When you purchase an affordable home, you get deduction under

  • Section 80C for up to 1.5 lakhs on loan principal amount

  • Section 24 for up to 2 lakhs on interest on loan

  • Section 80EEA for up to 1.5 lakhs on interest on loan

section 80EEA income tax

Now, let’s use the income tax calculator to see how much tax you can save with loan on an affordable home.

Step 1: Open the Income Tax calculator

Step 2: Key in your salary details

Salary Earnings
Salary Deduction

Step 3: Declare your investments

Income Tax Declarations

Step 4: Now, calculate Income Tax

Section 80EEA Income Tax Calculation

As per the calculation, you have a total tax liability of INR 140001

Suppose you have taken a home loan for 45 lakhs for a period of 10 years, and you have interest of INR 3.6 lakhs and principle of INR 3 lakhs for the current financial year.

Step 5: Declare your home loan under Section 24, Section 80EEA and Section 80C

Section 24 has a limit of 2 lakhs. So, let’s put interest of INR 2 lakhs under Section 24.

Declare Section 24

The remaining interest can be put under Section 80EEA which has a limit of INR 1.5 lakhs.

Declare Section 80EEA

The principal amount can be put under Section 80C.

Declare Section 80C

Step 6: Calculate Income Tax again

Calculate Income Tax

As you see, the total tax liability has come down to INR 28334

Save maximum Income Tax with the
Free Online Income Tax Calculator!

Open Income Tax Calculator

As you see, you have made huge tax savings with your affordable home. Remember to get a certificate from your bank on the interest and principal you paid for the financial year.

Frequently Asked Questions

What is the maximum deduction available if you purchase an affordable home?

Section 80C, Section 24 and Section 80EEA provides a maximum deduction of INR 5 lakhs

What is the maximum tax benefit if you purchase an affordable home?

Maximum tax deduction available is for INR 5 lakhs. So, you get income tax benefit of up to INR 1.5 lakhs

What is the maximum deduction for interest paid on home loan under Section 80EEA?

Under Section 80EEA the maximum deduction available is for INR 1.5 lakhs