Section 80EEA for Under-Construction Properties - How to Claim Tax Benefits

Buying your first house is thrilling, but the tax paperwork that accompanies a home loan usually isn't. If you are a first-time home buyer and have taken a loan on an affordable house, Section 80EEA of the Income Tax Act can assist you in saving a considerable sum annually. This gets a little more complicated when the property in question is still under construction. In this article, we tell you what Section 80EEA is, how it works with Sections 80C and 24, and when you can start claiming it when your home is not finished yet. 

Understanding Section 80EEA and Its Tax Benefits 

The Finance Act, 2019, established Section 80EEA as part of the government's "Housing for All" drive to make owning a home more affordable. It provides eligible first-time homeowners an additional deduction of up to ₹1,50,000 in a financial year on interest paid on a home loan for affordable housing. These Section 80EEA tax benefits can help reduce the overall tax liability for eligible borrowers. 

As such, the qualifying taxpayer can claim up to ₹3,50,000 of interest deductions in one financial year, combining the benefits of Section 24(b) and Section 80EEA. It is important to note right at the beginning that this deduction is only available if you are filing your return under the previous tax regime, as both the extra benefits under Section 24 (b) and 80EEA are not accessible under the new regime. 

Features of Section 80EEA 

Before we examine how this works for properties under construction, it is useful to look at the fundamental aspects of the section: 

• Deduction amount: Up to ₹1,50,000 in a financial year on interest paid on house loan or real interest paid, whichever is less. The deduction is intended to provide affordable housing tax benefits to eligible first-time homebuyers who meet the prescribed conditions. 

• Eligible taxpayers: Only individual taxpayers can take this deduction. Hindu Undivided Families (HUFs), corporations, partnership firms, etc. are not eligible. 

• Only first-time home buyers: You should not own any residential house property, self-occupied or let out, on the date of authorisation of the loan. 

• Loan sanction window: A loan should have been sanctioned by a financial institution or home finance company between April 1, 2019 and March 31, 2022. That window has now closed, so today the deduction is only valid if your loan was approved within that time period; you can continue claiming it every year for the rest of the life of that loan. 

• Property value cap: The property value for stamp duty shall not exceed ₹45 lakh. 

• No overlap with Section 80EE: If you are already claiming deduction under the former Section 80EE, you cannot claim 80EEA for the same loan. 

• Additional to Section 24(b) and 80C: The interest deduction under 80EEA is to be claimed in addition to the principal repayment deduction under Section 80C and the interest deduction under Section 24(b) separately. 

Also Read: Understanding Home Loan Principal Amount: Things You Need to Know 

Eligibility, Conditions and How 80EEA Works with 80C and Section 24 

Understanding Section 80EEA eligibility is important before claiming the deduction, as the benefit is subject to specific conditions relating to the borrower, loan sanction date and property value. 

Who can claim it 

It is only for individual taxpayers, including resident Indians and NRIs, who are buying their first home property. Co-borrowers, including first-time buyers and joint owners of the property, can claim up to ₹1,50,000 each. 

The "first-time homebuyer" condition 

You should not own any other residential property, wherever in India, as of the date of sanction of your loan. Many interpretations include property held jointly or through a spouse, so it's a good idea to examine your specific circumstances with a tax advisor. 

Property value caps 

The value of the house for stamp duty purposes should not be more than Rs 45 lakh. Further, government guidelines (via the Finance Bill memoranda) indicate that to be considered "affordable housing," property in metro cities such as Delhi NCR, Mumbai, Bengaluru, Chennai, Hyderabad and Kolkata should have a carpet area of no more than 60 square meters. In comparison, in other cities the limit is 90 square meters. 

Also Read: Stamp Duty India 2026: City-Wise Registration Charges Guide 

Date of loan sanction 

This is the most crucial date for determining eligibility. Your home loan should have been approved from 1st April 2019 to 31st March 2022. Any new loan today, even for affordable homes, shall not be eligible for 80EEA if sanctioned outside this window. 

Relation with Section 80C and Section 24 

These three provisions are related yet deal with separate aspects of your home loan and together determine the home loan tax deduction available to eligible borrowers. 

• Section 80C includes the principal amount you pay toward your home loan (and other eligible investments) up to ₹1,50,000 in a year. 

• Section 24(b) allows you to claim home loan interest of ₹2,00,000 a year, starting from the year you take possession. 

• Section 80EEA allows an additional deduction of ₹1,50,000 on interest only for qualifying affordable housing loans. 

Applicability of Section 80EEA Deduction on Under-Construction Property 

This is the portion that most under-construction homebuyers get stuck on. Understanding under-construction property tax benefits is important because the timing of when you can claim deductions differs from that for a completed property. 

Here is how it actually works: 

• Interest paid during construction is accumulated as "pre-construction interest." 

• The accumulated interest must be claimed in 5 equal annual instalments starting from the financial year of completion of construction or handing over of possession, whichever is earlier. 

• In addition, from the same year, you can also start claiming your normal yearly interest under Section 24(b) and, if eligible, Section 80EEA. 

Also Read: Home Loan Tax Benefits Explained 

Example: Say Priya obtains a house loan in April 2020 for a flat which is still under construction. The loan is sanctioned within the eligible window, and the stamp duty value of the flat is Rs 40 lakh. Interest accrues during construction, but she cannot claim it yet. Possession is transferred in April 2023. From FY 2023-24 onwards, she can claim one-fifth of the accumulated pre-construction interest every year (for 5 years) under Section 24(b). She can also claim interest for the current year under Section 24(b) up to Rs 2 lakh and an additional Rs 1.5 lakh under Section 80EEA, provided she meets the first-time buyer and property value conditions. 

Conclusion 

Section 80EEA is still a great perk for first-time buyers who availed of qualified house loans between April 2019 and March 2022, with an additional ₹1,50,000 deduction on interest over and beyond Section 24(b). As for under-construction properties, patience is key: the deduction only starts once you gain possession or work is completed, at which point your accumulated pre-construction interest also becomes claimable in instalments.  

Are you planning to buy your first home or want to get the most from your current house loan? IIFL Home Loans provides flexible house finance, reasonable interest rates and fast digital processing to take you closer to purchasing your home. Apply for a home loan with IIFL Home Loans immediately, and our team will assist you in understanding the tax savings applicable to your loan.