Important keyword: Income from House Property, Income Source, Section 80EEA.
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Affordable Housing and Section 80EEA
In Budget 2019, Finance Minister Nirmala Sitharaman outlined a vision for “Affordable Housing,” leading to the introduction of Section 80EEA. This section provides additional tax benefits on home loan interest for first-time home buyers starting from FY 2019-20.
Who Can Claim a Deduction Under Section 80EEA?
The deduction under Section 80EEA is available only to individuals who opt for the old tax regime. Both resident and non-resident individuals can claim this deduction. To be eligible, you must meet the following criteria:
The stamp duty value of the residential house must be up to INR 45 lakh.
The loan must be taken from a financial institution or a housing finance company.
The loan must be sanctioned between April 1, 2019, and March 31, 2022.
The assessee should not claim any deduction under Section 80EE.
The assessee should not own any residential house property on the date of loan sanction, making them a first-time home buyer.
The exemption limit under this section is INR 1,50,000. Additionally, you can claim a deduction under Section 24 along with 80EEA, providing a total benefit of up to INR 3,50,000 in a financial year.
Joint Ownership
If a house is owned jointly and all co-owners are making loan installment payments, each can claim this deduction individually, provided all conditions are met.
Conditions for Carpet Area of the House Property
According to the memorandum to the finance bill:
In metro cities (Bengaluru, Chennai, Delhi NCR, Hyderabad, Kolkata, and Mumbai), the carpet area should not exceed 60 square meters (645 sq ft).
In other cities or towns, the carpet area should not exceed 90 square meters (968 sq ft).
This definition applies to affordable real estate projects approved on or after September 1, 2019.
Difference Between Section 80EEA and Section 24
The deduction under Section 80EEA is available over and above the deduction under Section 24. This means a first-time home buyer can claim deductions under both sections if all conditions are met. Here’s how they compare:
Section 24: Allows a deduction of up to INR 2 lakh on home loan interest.
Section 80EEA: Allows an additional deduction of up to INR 1.5 lakh on home loan interest for first-time home buyers.
Example
Mr. Raj, a salaried individual, purchased his first home for INR 40 lakh. He took a home loan from a housing finance company, sanctioned on June 15, 2019. He pays an annual interest of INR 2.5 lakh on the loan.
Under Section 24: He can claim a deduction of up to INR 2 lakh.
Under Section 80EEA: He can claim an additional deduction of INR 50,000 (since the total interest paid exceeds INR 2 lakh).
Thus, Mr. Raj can claim a total deduction of INR 2.5 lakh on his home loan interest.
Sr. No.
Parameter
Under Section 80EEA
Under Section 24
1.
Possession
Possession of the property is not required to claim deductions u/s 80EEA
Possession of the property is required to claim deductions u/s 24
2.
Deduction Limit
INR 1,50,000
INR 2,00,000
4.
Source of Loan
A deduction can be claimed only if the loan is taken from banks and financial institutions
A deduction can be claimed even if the loan is taken from friends and family
5.
Value of the Property
The stamp duty value of the house should not be more than INR 45 Lakh
There is no such specification
6.
Category of Buyers
This deduction is available only to first-time home buyers
This deduction is available to all types of home buyers
7.
Loan Period
Deductions are available only if the loan is taken between April 1, 2019, and March 31, 2022
Deductions are available only if the loan is taken after April 1, 1999
How is the Deduction Calculated Under Section 80EEA?
The total deduction available under Section 80EEA is INR 1,50,000 or the interest payable amount, whichever is lower.
To illustrate this, let’s consider two examples:
Scenario 1:
Mr. Murthy took a home loan in FY 2019-20 for a house with a stamp duty value of INR 40 lakh. He paid INR 4,00,000 in interest for the year. He does not own any other residential house on the date of the loan sanction.
Solution:
Under Section 24: Mr. Murthy can claim a deduction of INR 2,00,000 for home loan interest.
Under Section 80EEA: Mr. Murthy can claim an additional deduction of INR 1,50,000 since the stamp value of the house is less than INR 45 lakh.
So, the total deduction Mr. Murthy can claim under both sections is INR 3,50,000.
Scenario 2:
Mr. and Mrs. Mehta jointly purchased a house worth INR 45 lakh in FY 19-20. Mr. Mehta individually took a home loan with an annual interest payment of INR 3,00,000.
Solution:
Mr. Mehta can claim a deduction under Section 24 for INR 2,00,000.
Under Section 80EEA, Mr. Mehta can claim an additional deduction of INR 1,00,000 (since the interest payable exceeds the limit).
Mrs. Mehta cannot claim a deduction under Section 80EEA as she is not a co-borrower. Thus, Mr. Mehta can claim a total deduction of INR 3,00,000.
ITR Form Applicable for Section 80EEA
Taxpayers can claim a deduction under Section 80EEA when filing their Income Tax Returns (ITR) if all conditions are met. The deduction can be claimed in any of the following ITR forms, depending on the individual’s income sources:
ITR 1
ITR 2
ITR 3
ITR 4
Supporting Documents
To claim a deduction under Section 80EEA, the following documents are required:
Form 16: Issued by the employer showing the details of salary and TDS.
Home Loan Certificate: Provided by the bank showing the interest and principal repayment.
Bank Account Statement: Showing the EMIs paid.
Home Loan Sanction Letter: Issued by the bank at the time of loan sanction.
Note: Taxpayers can claim the deduction under this section if the interest is payable, even if the payment has not been made. It is essential to have supporting documents, and the deduction can be claimed even if it is not reflected in Form 16, provided the documents are available.
Important Keyword: Chapter VI-A, Income from House Property, TDS.
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Form 12BB: Investment Declaration
Form 12BB, also known as an Investment Declaration, holds significant importance for salaried individuals. Essentially, it entails a comprehensive disclosure of all tax-saving investments made during a specific Financial Year. Employers require this form to accurately calculate and deduct TDS on salary income. It must be submitted at the commencement of each financial year.
For instance, let’s consider Mr. Yash, who invested 3 lakhs in tax-saving schemes during FY 2019-20. He is required to file his Form 12BB, disclosing all investment details to his employer between April 1, 2019, and June 30, 2019. Subsequently, he can submit evidence of these investments between January 1, 2020, and March 31, 2020. This practice ensures precise TDS deduction and is advisable for maintaining accurate financial records.
Sample Form 12BB – Investment Declaration
Supporting Documents
Include essential details such as:
Personal Information: Name, Address, PAN, and Designation of the employee.
Current Financial Year.
Details regarding:
House Rent Allowance (HRA)
Leave Travel Concession or Assistance (LTA)
Deduction of Interest on Borrowing
Deduction under Chapter VI-A
Additional Information: Place, Date, and Signature.
These documents are crucial for accurately declaring tax-saving investments and allowances to the employer for appropriate TDS calculation on salary income.
Important Keyword: Chapter VI-A, Form 12BB, Income from House Property, TDS.
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How to fill Form 12BB?
All salaried taxpayers are required to complete Form 12BB. This form must be submitted to their employer at the start of each financial year to facilitate accurate Tax Deducted at Source (TDS) deductions. Form 12BB serves as a declaration of all tax-saving investments made by the employee during the relevant financial year. By disclosing these investments, employees ensure that their TDS deductions are calculated correctly in line with their eligible tax-saving investments.
Steps to Fill Form 12BB
To download a sample Form 12BB, you can visit the Income Tax Department website.
Personal Details:
Name: [Your Name]
Address: [Your Address]
PAN: [Your PAN Number]
Financial Year: 2020-2021
House Rent Allowance (HRA) Details:
If incurring rental expenses for work, include details here.
Leave Travel Allowance (LTA) Details:
Include details of LTA if applicable.
Interest on Loan for Borrowings:
Enter details of interest on EMI of home loans for the current financial year.
Benefits up to INR 2,00,000 for self-occupied property and no limit for rented property.
Chapter VI-A Deductions:
Add details of tax-deductible investments and deductions under various sections such as 80C, 80CCD (1B), 80D, 80DD, 80E, 80G, etc.
Who needs to Fill Form 12BB?
Since 1st June 2016, it’s mandatory for every salaried taxpayer to submit Form 12BB. Along with the form, you need to provide proofs/evidence supporting your investments. This helps in reducing your taxable income and ensures accurate TDS deduction by your employer from your salary.
However, if you fail to file Form 12BB, your employer might deduct excess TDS from your salary. Don’t worry though, you can claim back this excess TDS while filing your Income Tax returns. It’s important to ensure timely submission of Form 12BB to avoid unnecessary deductions and streamline your tax obligations.
Important Keyword: Form 16A, Income from House Property, Income Source.
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Document Checklist for Income from House Property
House property refers to any land or building, including the land attached to the building such as a courtyard, parking space, or compound. A taxpayer must report income earned from such property when filing their Income Tax Return (ITR). To accurately calculate and report this income, it is essential to maintain a checklist of supporting documents. The types of properties that fall under this category include:
Residential Houses/Flats
Shops
Office Space
Factory Sheds
Farmhouses
Godowns
Cinema Buildings
Workshop Buildings
Hotel Buildings
You can file ITR-1 if you have earned income from one property. However, you need to file ITR-2 if you own more than one property. You can file ITR online using ITR Utilities or through registered e-Return Intermediary (ERI)
House Property Income Documents Checklist
When filing your Income Tax Return (ITR) for income earned from house property, it is crucial to have all necessary documents ready. Here is a checklist of essential documents:
PAN
The Permanent Account Number (PAN) is an alphanumeric ID issued by the Income Tax Department (ITD). It is used to link all transactions of a taxpayer with their income. PAN is a vital document for filing ITR.
Aadhaar
Aadhaar is a 12-digit unique identification number issued by the Unique Identification Authority of India (UIDAI). It is mandatory for resident individuals to provide their Aadhaar details when filing ITR.
Utility Bill
Taxpayers must disclose the address of all properties they own while filing ITR. Utility bills, which include the property address, serve as proof of address. Examples include:
Electricity Bill
Water Bill
Gas Bill
Rent Agreement
Rental income is considered taxable income. The rent agreement between the property owner and the tenant serves as proof of the rental income earned during the financial year. Ensure to have a copy of:
The Rent Agreement
Rent Receipts (if applicable)
Additional Important Documents
Property Ownership Documents
Proof of ownership is essential for all properties. This includes:
Sale Deed
Title Deed
Purchase Agreement
Property Tax Receipts
Municipal Taxes Paid
Documents showing the payment of municipal taxes, which are deductible from rental income, include:
Property Tax Receipts
Municipal Tax Payment Receipts
Interest on Home Loan
If you have taken a home loan for the property, the interest paid on the loan is deductible. Required documents include:
Home Loan Statement
Interest Certificate from the Bank
Maintenance and Repair Bills
Expenses incurred for the maintenance and repair of the property are also deductible. Keep the following:
Maintenance Bills
Repair Receipts
Insurance Premium Receipts
Insurance premiums paid for the property are deductible. Ensure you have:
Insurance Premium Receipts
Filing ITR
By ensuring you have all these documents organized and accessible, you can accurately report your income from house property and claim all eligible deductions when filing your ITR. This thorough preparation helps in smooth and error-free tax filing.
Form 16A
Form 16A will be provided if TDS is deducted on your rental income. While filing your ITR you can claim this TDS using Form 16A.
Home Loan Repayment Certificate/Interest Certificate from the Bank
This certificate provides details of the capital amount, repayment amount, interest charged, and co-ownership details. It serves as proof for claiming deductions on both interest repayment and principal repayment, reducing your net taxable house property income.
Municipal Tax Receipts
Municipal tax is paid on properties. Taxes paid on let-out properties can reduce your net taxable rental income. Therefore, municipal tax receipts are required while calculating the income from house property.
Important Keyword: Aadhaar, Business and Profession Income, Capital Gains, Income from House Property, Income Source, ITR Documents, ITR Form, Salary Income, Tax Saving Investments.
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Documents required for Income Tax Return filing in India
Income Tax Return (ITR) forms vary depending on the taxpayer’s sources of income. Specific documents are necessary for filing the ITR.
Additional documents required may vary depending on the taxpayer’s income situation. These documents do not need to be submitted to the Income Tax Department during the filing of the Income Tax Return since ITR forms are annexure-less. However, if a taxpayer receives a notice from the Income Tax Department, such documents may be required to be submitted.
List of Basic Documents required for filing the Income Tax Return – ITR
Here’s a breakdown of the essential documents required for filing an Income Tax Return (ITR) in India, based on different income heads:
Salary Income/ Pension Income:
Form 16
Salary Slips (if Form 16 is unavailable)
Pension Statement/ Passbook
House Property Income:
Property Address
Rent Agreement
Co-ownership details for co-owned property
Municipal Tax Receipts
Form 16A (if TDS is deducted on rental income)
Home loan repayment certificate/ Interest Certificate from the bank
Pre-Construction Interest Details
Capital Gains Income:
Sales and Purchase deed, stamp duty valuation (for sale of land/ building)
Details of Improvement cost
Details of expenses related to the transfer of capital assets
Proof of cost of the asset, cost of improvement, and sales receipts (for movable assets)
Details of investments made to claim exemptions
Capital Gains Deposit Account details (if applicable)
For shares & securities: Trading statement/ Stock Ledger/ Contract Notes
Business and Professional Income:
Balance Sheet and Profit & Loss Statement
Bank Account Statement/ Passbook
Supporting documents for expenses incurred
Cash Register
Any other documents required to maintain business & profession books of accounts
Audit Report (if profit from business is less than 8% of Total Turnover)
Income from Other Sources:
Total interest income earned from savings/ current account
Interest certificate from deposits/ Bonds/ NSC
PPF Account Statement/ Passbook
Dividend Warrants/ counterfoils
Proof of details of receipt of any other incomes
Rent Agreement (in case of let out machinery)
These documents provide comprehensive support for accurate tax filing across various income categories.
Documents Required for Tax Saving Investments (Section 80)
For individuals seeking tax-saving investment opportunities, certain documents play a crucial role in claiming deductions. Here’s a list of documents essential for tax-saving investments:
ELSS/ ULIP/ NSC Investment Details:
Documents confirming investment in Equity Linked Savings Schemes (ELSS), Unit Linked Insurance Plans (ULIP), or National Savings Certificate (NSC).
PPF Account Passbook/ Statement:
Passbook or statement reflecting transactions and balances in the Public Provident Fund (PPF) account.
Life/Medical Insurance Receipts:
Receipts or premium payment details for life insurance policies or medical insurance plans.
Details of Tax-Saving FD:
Information related to investments in Tax-Saving Fixed Deposits, including deposit receipts and interest certificates.
National Pension Scheme Investment Details:
Documentation supporting contributions made to the National Pension Scheme (NPS).
Senior Citizen Saving Scheme Investment Details:
Documentation pertaining to investments in the Senior Citizen Saving Scheme (SCSS).
Donation Receipts:
Receipts or certificates acknowledging donations made to eligible charitable organizations.
Children Tuition Fees Paid Receipts:
Receipts confirming payment of tuition fees for children’s education.
Repayment Certificate for Home Loan/ Education Loan:
Certificate or statement from the lending institution confirming repayment of home loan or education loan, eligible for tax deduction.
Certificate from Specified Medical Authorities in Case of Disability:
Certification from designated medical authorities validating disability for claiming tax benefits.
Receipts/Proof of Any Other Tax-Saving Investments/Contributions:
Supporting documents for other tax-saving investments or contributions made during the financial year.
Documents Required for Foreign Income and Foreign Investments:
Details of foreign income earned and taxes deducted, if applicable.
Information regarding assets held outside India, including foreign bank accounts.
These documents serve as evidence of tax-saving investments and contributions, facilitating the process of claiming deductions while filing income tax returns.
