Two new Tax Deduction Introduce in FY 2019-20 which you can claim while filing ITR

The economic impact of the 2020 coronavirus pandemic in India has been largely disruptive. The lockdown though necessary has led to a disastrous impact on the economy. The Government of India announced a variety of measures to tackle the situation, from food security and extra funds for healthcare and for the states, to sector related incentives and tax deadline extensions.

With the ongoing COVID -19 pandemic a lot of income tax due dates were extended by The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 read with Notification No. 35 /2020, dated 24-06-2020. In view of the same, the due date of furnishing ITR for FY 2018-19 has been extended till 31st July, 2020 and for FY 2019-20 till 30th November, 2020. The Central Board of Direct Taxes (CBDT) has notified and released various ITR forms for different purposes.

Chapter VI A of Income Tax Act contains various sub-sections of section 80 that allows an assessee to claim deductions from the gross total income on account of various tax-saving investments, permitted expenditures, donations etc. Such deductions allow an assessee to considerably reduce the tax payable.

Since the current tax filing involves the income earned during the financial year 2019-20, one must check all deductions allowed in that financial year. Besides already available deductions, the government has also introduced two new ones for the income earned during financial year 2019-20, which individual taxpayers should take note of. Let us learn more about these deductions in this article.

1) Deduction under Section 80EEA – Deduction for interest on affordable housing loan

Section 80EEA was introduced by Finance minister Nirmala Sitharaman in the 2019 Union Budget with an aim to give a boost to the centre’s ‘Housing for All by 2022’ programme, by way of offering additional tax benefits on the purchase of affordable homes. Under the provisions of the section, home buyers can save an additional Rs 1.5 lakhs per year towards the interest paid on home loans, over and above the Rs 2 lakhs that they already save under Section 24(b). Therefore, taxpayers can claim a total deduction of Rs 3.5 lakhs for interest on home loan, if they meet the conditions of section 80EEA.

For instance, Mr A incurred an interest expense of Rs. 270000 on the amount borrowed for acquisition of residential house property. Mr A can claim deduction with respect to Interest Expense as follows:

• Rs 200000 can be claimed in Section 24(b)
• Balance Rs 70000 can be claimed in Section 80EEA

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Who is eligible to avail the benefit of Section 80EEA?

An Individual who has taken a Loan for acquisition of residential house property from any Financial Institution is eligible to avail the benefit of Section 80EEA. The deduction under this section is available only to individuals. This deduction is not available to any other taxpayer.

What are the conditions to be followed to claim Deduction under Section 80EEA?

In order to claim deduction under Section 80EEA, the following conditions are required to be fulfilled:

• Housing loan must be taken from a financial institution or a housing finance company for buying a residential house property.
• The assessee should not own any other house property on the date of the sanction of a loan. The taxpayer should be a first-time home buyer.
• Stamp duty value of the house property should be maximum Rs 45 lakhs.
• The taxpayer should not be eligible to claim deduction under the existing Section 80EE.
• If the unit is located in a metropolitan city, its size should not exceed 645 sq ft or 60 sq metres. For units in any other city, the size has been limited at 968 sq ft or 90 sq metres.

Which cities are considered metropolitan cities under Section 80EEA?

Cities that are considered metropolitan for this purpose are Bengaluru, Chennai, Delhi, Faridabad, Ghaziabad, Greater Noida, Gurugram, Hyderabad, Kolkata, Mumbai and Noida.

Can NRI’s avail the benefit of Section 80EEA?

Section 80EEA does not specify if the assessee is required to be a Resident to be able to claim this benefit. Therefore, it can be concluded that both Resident and Non-Resident Indians can claim this deduction.

Is it mandatory that the residential house purchased be self-occupied to claim the benefit of Section 80EEA?

Section 80EEA does not specify if the residential house should be self-occupied to claim the deduction. So, borrowers living in rented houses can also claim this deduction.

Can joint owners claim deductions under Section 80EEA separately?

In case the joint owners are also co-borrowers, they can both claim Rs 1.50 lakhs each as deductions under this Section, provided they meet all the other conditions.

2) Deduction under Section 80EEB – Deduction for interest on electric vehicle loan

To promote the electric vehicles in the country as a measure to combat the rising pollution the Union Budget of 2019 announced that vehicles with advanced batter and registered e-vehicles will be incentivised under the new section 80EEB. Section 80EEB allowed a deduction for interest paid on the loan amount taken for the purchase of electric vehicle.

What is the quantum of deduction under Section 80EEB?

As per Section 80EEB, individuals can avail for a deduction amount of up to Rs 1,50,000 per annum on payment of interest on a loan secured for the purchase of an electric vehicle. The electric vehicle can either be purchased for individual use or business purpose.

Who is eligible to avail the benefit of Section 80EEB?

An Individual who has taken a Loan for purchase of an electric vehicle from any Financial Institution is eligible to avail the benefit of Section 80EEB. The deduction under this section is available only to individuals. This deduction is not available to any other taxpayer.

What due mean by an electric vehicle for the purpose of Section 80EEB?

As per the Section 80EEB, an Electric Vehicle refers to a vehicle which is powered exclusively by an electric motor whose traction energy is supplied exclusively by traction battery which is installed in the vehicle and has such electric regenerative braking system, which upon during braking provides for the conversion of vehicles kinetic energy into electrical energy.

What are the conditions to be followed to claim Deduction under Section 80EEB?

In order to claim deduction under Section 80EEB, the following conditions are required to be fulfilled:

• The loan for the purchase of electric vehicle should be taken from a financial institution or a non-banking financial company.
• The loan should be sanctioned any time between the period starting from April 1, 2019, until March 31, 2023.
• The maximum amount of deduction available under Section 80EEB is Rs 1,50,000 per annum.
• Once the deduction concerning the interest amount has been claimed under Section 80EEB, no further deduction can be claimed for such interest payment under any other provisions of the Act for the same or any other assessment year. 

Can NRI’s avail the benefit of Section 80EEB?

Section 80EEB does not specify if the assessee is required to be a Resident to be able to claim this benefit. Therefore, it can be concluded that both Resident and Non-Resident Indians can claim this deduction.

Tax deductions available under Income Tax Act are some of critical tools to help the assessee to save taxes by reducing their taxable income which in turn reduces their tax outflows. So it is the duty of the assessee to be aware of all the income tax deductions available for their own benefit.

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