One of the most popular modes of investment is real estate. However, owning a house is, unfortunately, not possible for everyone due to multiple financial considerations.

The repayment and interest payments on mortgages also seem to frighten individuals. But what if getting a mortgage may provide you with tax advantages? The Indian government has reinstated the income tax statute's house loan interest deduction portion.

First-time homeowners are eligible for tax advantages under Section 80EE of the Income Tax Act of 1961. Let's first examine what section 80EE is all about.

Section 80EE of the Internal Revenue Code allows first-time homebuyers to deduct the mortgage cost. For individuals who obtained a mortgage during the fiscal year 2013–2014, a tax reduction of up to one lakh rupees is available.

Low-income homeowners were the primary beneficiaries of the tax reduction offered by the deductions allowed under section 80EE. The only individuals who may deduct the interest they pay on their mortgage from their taxes by Section 80EE are first-time buyers.

The various characteristics of the Section 80EE home loan interest deductions are listed below:

1. Eligibility requirements

Only people are eligible to use the deduction allowed by this clause. This means that regardless of your status as a HUF, an AOP, a business, or any other taxpayer, you are not qualified to request compensation under this provision.

2. Amount cap

The maximum deduction allowed is Rs 50,000. The limit of Rs. 2 lakhs set out in Section 24 of the Income Tax Act is exceeded by this sum.

3. Other circumstances

The taxpayer must not be the owner of any other properties when the loan is being processed to be eligible for this deduction. If you and your spouse jointly own the property, you are entitled to a tax benefit percentage.

It would help if you thought about the tax advantages you may get on a house loan when you apply for one. To help you understand how to repay a home loan and the associated tax benefits^*, examine the following two factors:

• The principal amount repaid
• Repayment of Home Loan Interest.

Because the repayment of a house loan consists of two distinct components, the tax advantage related to the loan is controlled by several parts of the Income Tax Act and may be deducted from income under various sections of the Income Tax Act.

You may deduct interest paid on house loans from your taxes under Section 80C and Section 80EE, but each has its qualifying requirements and upper limits. Section 80C of the Income Tax Act offers cumulative deductions on investments starting from small savings instruments to home loan interest repayment.

In contrast, Section 80EE of the Income Tax Act is exclusively for the refund of home loan interest on loans sanctioned in the previous financial year. Section 80EE allows for tax deductions of RS 1 Lakh for the current financial year, and the balance deduction amount can be claimed in the following financial year; under Section 80C, the remaining deduction amount can be claimed in the next financial year.

The national budget for FY 2013–14 included Section 80EE, a unique programme intended to give first-time home buyers deductions based on the interest payments of home loans. At the time, the maximum deduction that could be claimed was Rs. 1 lakh and this tax benefit was available for two years, i.e., FY 2013–14 and FY 2014–15. Arun Jaitley reintroduced it in 2016 with a modified amount of Rs 50,000.

A taxpayer must meet the following to be eligible for deductions under Section 80EE:

• Under Section 80EE, only persons may make a deduction claim. You are not qualified to get this benefit if you are a member of a Hindu Undivided Family (HUF), an association of people (AOP), or any other category of taxpayer.
• The discount is applicable for single-person and joint real estate purchases.
• Some couples decide to buy a home jointly and pay for it over time in instalments. Each spouse may submit a separate section 80EE deduction claim in such circumstances.
• Only new homeowners are eligible for the discount. Additionally, the owners had to get a house loan from a recognised financial institution to buy the property.
• In addition, the person doesn’t need to live in the home for which this deduction is being claimed. The person can claim this deduction even if they rent their property.
• The assessee may profit from the deduction until the loan payment is completed.

Now that we are clear on its rationale let's discuss how to claim the home loan interest deduction under Section 80EE. An assessee must do the following actions to claim a deduction for interest paid on a mortgage:

• The assessee must determine how much interest was paid on the mortgage for a particular fiscal year.
• The assessee must also consider sections 24(b) and 80EEee. By section 24, he may deduct Rs. 200,000 if the total interest paid on the mortgage exceeds Rs (b). According to section 80EE of the Income Tax Act, the assessee may deduct the extra amount.
• The assessee must produce a loan approval letter and the interest certificate to claim an 80EE deduction for home loan interest. The principal and interest amounts should be correctly separated on the interest certificate. The amount of interest the assessee paid throughout the financial year should also be included in the statement.

Let's use an example to clarify this:

Mr Mohan has obtained a mortgage. He makes a monthly payment of Rs 60,000. The principal of this loan is Rs 40,000, and the interest will be Rs 20,000. He pays Rs. 2,40,000 in interest throughout the fiscal year.

• By section 24(b), Mr Mohan may deduct a maximum of Rs. 200,000 in interest from a house loan if he complies with all of the section's conditions.
• Assume Mr Mohan satisfies the section's requirements in full. If so, section 24 allows him to deduct Rs 200,000 from his taxes (b).
• He must first spend the whole Rs 200,000 allotment. The remaining amount of Rs. 40,000 may be claimed under section 80EE. In addition to section 24, there is a section 80EE benefit (b).
• Additionally, he may deduct the principal amount of the loan. A portion of the Rs. 480,000 may be written off, but not the total sum. He would be entitled to deduct Rs 150,000 from his income under section 80C.

The taxpayer must determine their eligibility before claiming the section 80EE deduction limit. The following prerequisites must be satisfied:

• The house for which the taxpayer is requesting a deduction must be the assessed first purchase.
• Such a home isn't worth more than Rs 50 lakhs.
• Such a residence has a home loan of no more than Rs 35 lakhs.
• The house loan application for the acquisition of the residential property has been approved by a housing finance business or financial institution.
• Banks, entities indicated by section 51 of the Banking Regulation Act of 1949, and banking and home financing firms are all considered financial institutions in this provision.
• Only residential property, not commercial property, shall be the subject of the house loan.
• On the day the loan is sanctioned or approved, the assessee cannot be the owner of another residence.
• An expiration date applies to loan approvals. For instance, to claim deductions for 2021–22, the business or financial institution had to grant a house loan between 1 April 2020 and 31 March 2021.
• After deducting interest on a house loan under Part 80EE, the taxpayer is not permitted to do so for the same interest under any other section of the Income Tax Act.

We should consider section 24 before moving on to the deductions under section 80EE.

The 1961 Income Tax Act's Section 24

The assessee, a person responsible for paying tax or a monetary amount under this Act, is qualified to take advantage of a deduction for the interest they pay on the loan amount used to buy the property under this Income Tax Act. You must purchase a residential property to benefit from a discount on the mortgage. "Deductions from Income from House Property" is another name for this deduction.

In this section, there are two different deductions you may make:

• Interest on loans and standard deductions. The standard deduction is dealt with in section 24(a), whereas the interest paid on house loans is dealt with in section 24(b).
• The highest deduction allowed under Section 24(b) of the Income Tax Act for interest paid on a home loan to buy, acquire, renovate, or build a residential property is Rs 200,000. This sum was formerly Rs. 150.000.

Let's talk about how the two portions relate to one another:

• The assessee may deduct the interest on the mortgage by both section 24(b) and section 80EE if the assessee satisfies both conditions. In essence, he is eligible for deductions up to Rs. 250.000.
• However, the assessee must first use all of the Rs. 200,000 in deductions allowed by Section 24. (b). He may only use the second exemption under section 80EE after the first one has run its course.

The finance minister included Section 80 EEA in the 2019 Union Budget. This section will benefit taxpayers by providing additional tax relief on the interest they pay on home loans, especially those in the middle-income brackets.

With this financial assistance, first-time homebuyers would be able to purchase their houses. Under section 80 EEA, taxpayers may deduct up to Rs150,000 of the interest they pay on a house loan. A financial institution should be used to get a house loan.

Additionally, this deduction will be accessible starting with the 2020 assessment year and the following year. The assessee claiming a deduction under section 80EEA is not permitted to also claim a deduction under section 80 EEA, it should be noted.

First-time home buyers can now benefit from tax deductions on the interest paid toward the home loans they take out, thanks to the deductions permitted under Section 80EE of the Income Tax Act. Buying a home is quite expensive.

Thus, this exemption under Section 80EE is a massive help to first-time buyers. One ought to take advantage of this tax break. This deduction is available to homebuyers for the duration of their loan. Get a statement from the lender detailing the amount you have paid toward the principal and interest of the mortgage if you are a first-time home buyer. This will allow you to deduct taxes under Section 80EE and the other stated sections.

Remember these tax deductions and how they lessen your load by offering them if you are a first-time house buyer or currently have a home loan and are unsure about how to take a home loan or repay it.