How to Get the Best Home Loan Tax Exemption: 80EEA and 80C

Sections 80EEA and 80C home loan tax exemptions help you save on taxes as a homebuyer. These sections of the Income Tax Act of 1961 allow you to deduct home loan-related expenses from your net taxable income annually. These include interest and principal of your home loan. You can claim up to ₹1.5 lakh under each of these sections simultaneously.

However, your eligibility for claiming exemptions under these sections depends on your profile as a homebuyer. A detailed idea of Section 80C and 80EEA for home loan interest exemption in the Income Tax Act will help you to unlock maximum tax savings. 

Section 80C of the Income Tax Act allows you to claim deductions on the principal you pay on your home loan. You can also get deductions for stamp duty and registration charges under this section. The total amount that you can claim as a deduction each year is up to ₹1.5 lakh. 

However, these benefits are applicable only if you opt for the old tax regime and you do not sell the property within five years of possession. Otherwise, any deduction that you may have claimed earlier will be added back to your income for the year in which you sell the house.

Here is an example to help you understand 80C home loan tax benefits: Mr. Sharma takes a home loan in 2023. For the financial year 2024-25, the principal repayment on the home loan is ₹1.2 lakh. In this case, Mr. Sharma can claim the entire amount he pays as principal payment as a deduction under this section.

Section 80EEA allows individuals to claim a deduction on home loan interest for properties with a stamp duty value of up to ₹45 lakh. It applies to loans taken between April 2019 and March 2022. 

The government introduced this section to support the Housing for All mission. It also aimed to revive the real estate market during a slow market. Both residents and non-residents can claim this deduction.

Eligibility requirements and conditions of the section 80EEA tax exemption include the following:

• Only individuals can claim this deduction

• HUFs, AOPs, firms, and companies cannot avail of this benefit

• You have to opt for the old tax regime to claim the deduction

• You can take a housing loan from a financial institution or a housing finance company

• Sanction of the loan should be between April 1, 2019 and March 31, 2022

• The stamp duty value of the property should be ₹45 lakh or less

• Applicable only if you are a first-time homebuyer and do not own any other residential property on the date of loan sanction 

• Avoid claiming deduction under Section 80EE to remain eligible

Check out this example to understand how tax benefits are available under Section 80EEA:

• Mr. Sharma, a first-time homebuyer, took a loan in Jan 2021 for a property worth ₹40 lakh

• Considering he had chosen the old tax regime, he paid ₹3 lakh in home loan interest

• Under Section 80EEA, he can claim ₹1.5 lakh as tax deduction, significantly reducing his taxable income

Here is a detailed comparison of Section 80C and Section 80EEA under the Income Tax Act of 1961, focusing on their application to home loan deductions:

Use the following steps to claim deductions under the old tax regime when filing your ITR:

Step 1: Know the Applicable Sections

Understand which section applies to you:

• Section 80C: Deduction up to ₹1.5 lakh on principal

• Section 24(b): Deduction up to ₹2 lakh on interest for self-occupied and rented homes

• Section 80EE/80EEA: Added interest benefits for first-time buyers

Step 2: Collect Required Documents

Gather the sanction letter, interest certificate, and property ownership proof

Step 3: Calculate Your Deductions

Separate the total amount paid into principal and interest, and apply them under the correct sections

Step 4: Inform Your Employer

Submit home loan details to your employer to adjust TDS accordingly

Step 5: File Your ITR

File your return by July 31st and enter the principal under Section 80C and interest under Section 80EEA

Both Section 80C and Section 80EEA offer valuable deductions. Keep in mind that 80EEA applies only to first-time homebuyers and comes with conditions related to the property value and loan sanction period. The right combination based on your eligibility will maximise your savings on taxes. 

1. What is the limit of 80C deduction for a home loan?

You can claim up to ₹1.5 lakh per year under this section. Individuals, HUFs, and senior citizens can claim it. 

2. Is 80EEA available in the new tax regime?

Home loan tax exemption in the new tax regime is not available. But if you rent out the property, you can claim the interest paid on the home loan as a deduction against the rental income under Section 24.

3. Can I claim 80EEA on a second home?

No, deduction under this section is only applicable to first-time home buyers. 

4. How is Section 24 different from 80EEA?

Under the Income Tax Act, you can claim up to ₹2 lakh under Section 24. On the other hand, Section 80EEA will allow you to claim tax benefits up to ₹1.5 lakh. 

5. Does home loan principal come under 80C?

Yes, this section will allow you to claim tax deductions on the amount you repay towards the principal component of your home loan.

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