Skip to main content

Home Loan Tax Benefits

 
You are aware of the basic tax exemptions on home loans, but there are more ways a home buyer can benefit.
 
The year 2016 is turning out to be one of the best for home buyers, with more tax benefits, interest rate cuts, stagnant property prices and new launches in the affordable segment. Many of you may be looking to take advantage of these benefits and buy a house. While hunting for a house at the right price, you'll be haggling with the bank to cut a loan deal too. Even if you get a discount on both, your tax bill can cost you dear, unless you know the rules well. Everyone knows the basics--you can claim up to `1. 5 lakh for repayment of principal under Sec 80C and up to `2 lakh under Sec 24 for interest payment. Here is a list of lesser-known and often missed tax benefits on home loans.

1 You can claim tax benefit on interest paid even if you missed the EMI. Unlike the deduction on property taxes or principal repayment of home loans, which are available on `paid' basis, the deduction on interest is on accrual basis. Even if you have missed a few EMIs during a financial year, you would still be eligible to claim deduction on the interest part of the EMI for the entire year. However, retain the documents showing the deduction so that you can substantiate if questioned by tax authorities.

2 Most taxpayers are unaware that charges related to their loan qualify for tax deduction. These charges are considered interest, and therefore, deduction can be claimed on the same. Moreover, there is a tribunal judgement which held that processing fee is linked to services rendered by the bank in relation to the loan granted, and is thus covered under service fee. Therefore, it is eligible for deduction under Section 24 against income from house property. However, any penal charges such as those for missing an EMI or late repayment, would not be eligible for deduction.

3 You score negative tax points if you sell a house within five years from the date of purchase, or five years from the date of taking the home loan. Any deduction claimed under Section 80C in respect to principal repayment of housing loan would get reversed and added to your annual taxable income for the year in which the property is sold, and you will be taxed at current. Thankfully, the loan amortisation tables are such that the repayment schedule is interest heavy and the tax-reversal rule only applies to Section 80C. You can still hold on to the tax benefits you claimed under Section 24 for interest payment.

4 Loans taken from relatives and friends are eligible for tax deduction. You can claim a deduction under Section 24 for interest repayment on loans taken from anyone, provided the purpose of the loan is to purchase or construct a property. You can also claim deduction for money borrowed from individuals for reconstruction and repair of property. It does not have to be from a bank.The lender must also file an income-tax return reporting the interest income and paying tax on it. This rule, however, is only applicable for interest repayment. You will lose all tax benefits for principal repayment under Sec 80C if you do not borrow from a bank or employer. Additional benefit of `50,000 under Sec 80EE is also not available if you borrow from individuals.

5 You can claim pre-construction period inter est for up to five years. You know you can start claiming your home loan benefits once the construction is complete and you get possession. But what happens to the instalments you paid during the construction or before you got the keys? As per the rules, you cannot claim principal repayment but interest paid during the period can be accrued and claimed post-possession. The law allows deferred deduction on interest payable during the pre-construction period. The deduction is available equally over a period of five years, starting from the year of possession

-----------------------------------------------
Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds

Top 10 Tax Saver Mutual Funds to invest in India for 2016

Best 10 ELSS Mutual Funds in india for 2016

1. BNP Paribas Long Term Equity Fund

2. Axis Tax Saver Fund

3. Franklin India TaxShield

4. ICICI Prudential Long Term Equity Fund

5. IDFC Tax Advantage (ELSS) Fund

6. Birla Sun Life Tax Relief 96

7. DSP BlackRock Tax Saver Fund

8. Reliance Tax Saver (ELSS) Fund

9. Religare Tax Plan

10. Birla Sun Life Tax Plan

Invest in Best Performing 2016 Tax Saver Mutual Funds Online

Invest Online

Download Application Forms

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

---------------------------------------------

Leave your comment with mail ID and we will answer them

OR

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

OR

Leave a missed Call on 94 8300 8300

-----------------------------------------------

Popular posts from this blog

Mutual Fund Review: Religare Tax Plan

Tax Plan is one of the better performing schemes from Religare Asset Management. Existing investors can redeem their investment after three years. But given the scheme's performance, they can continue to stay invested   Given the mandated lock-in period of three years, tax saving schemes give the fund manager the leeway to invest in ideas that may take time to nurture. Religare Tax Plan's investment ideas revolve around 'High Growth', which the fund manager has aimed to achieve by digging out promising stories/businesses in the mid-cap segment. Within the space, consumer staples has been the centre of attention for the last couple of years and can be seen as one of the key reasons for the scheme's outperformance as compared to the broader market. It has, however, tweaked its focus and reduced exposure in midcaps as they were commanding a high premium. The strategy seems to have worked as it returned a 22% gain last year. Religare Tax Plan has outperformed BSE 100...

Mutual Funds: Past Performance is not just everything

Many a times your agent / distributor / relationship manager tries to push you some mutual fund schemes by enticing you with a typical sales pitch…"Sir, this scheme has generated 20% returns in the past one year." And this sales pitch often gets louder when the market conditions have been favourable. Some of the agents / distributors / relationship managers have another unique way of luring you. They say, "Sir / madam this scheme has been awarded the best scheme award in the past by a leading business channel"... And hearing all these sales talks you investors very often get attracted and sign a cheque in favour of the respective scheme.   But please ask yourself do you hear these sales talks when the capital markets turn turbulent? Why is it so that your agent / distributor / relationship manager avoids talking to you during turbulent times of the capital markets and doesn't boast about returns generated by the respective funds or awards being conferred on t...

ICICI Prudential Balanced Fund

 ICICI Prudential Balanced Fund scheme seeks to generate long-term capital appreciation and current income by investing in a portfolio that is investing in equities and related securities as well as fixed income and money market securities. The approximate allocation to equity would be in the range of 60-80 per cent with a minimum of 51 per cent, and the approximate debt allocation is 40-49 per cent, with a minimum of 20 per cent. An impressive show in the last couple of years has propelled this fund from a three-star to a four-star rating. The fund has traditionally featured a high equity allocation, hovering at well over 70 per cent, which is higher than the allocations of the peers. But in the last one year, the allocation has been moderated from 78-79 per cent levels to 66-67 per cent of the portfolio. ICICI Prudential Balanced Fund appears to practise some degree of tactical allocation based on market valuations. Within equities, well over two-thirds of the allocation is parked i...

Good time to invest in Infrastructure Funds

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Good time to invest in infrastructure The Sensex has gained almost 10 per cent from May 15 till date, while the CNX Infrastructure Index has gained almost 17 per cent in the period. The price to earnings ( P/ E) ratio of the BSE Sensex is 18.96; for the CNX Infrastructure Index, it is 24.57. The estimated P/ E for next year is 14.04 for the Sensex. Of the 24 companies that make up the CNX Infrastructure Index, six have a P/ E higher than 20. Does this mean infrastructure is fairly valued? Or, has it run up quite a bit? According to experts, barring stray companies, the infra sector is fairly valued and it is a good time to invest. Even if some companies are facing debt restructuring problems, once interest rates come down and regulatory norms become flexible, they will start giving good re...

All about "Derivatives"

What are derivatives? Derivatives are financial instruments, which as the name suggests, derive their value from another asset — called the underlying. What are the typical underlying assets? Any asset, whose price is dynamic, probably has a derivative contract today. The most popular ones being stocks, indices, precious metals, commodities, agro products, currencies, etc. Why were they invented? In an increasingly dynamic world, prices of virtually all assets keep changing, thereby exposing participants to price risks. Hence, derivatives were invented to negate these price fluctuations. For example, a wheat farmer expects to sell his crop at the current price of Rs 10/kg and make profits of Rs 2/kg. But, by the time his crop is ready, the price of wheat may have gone down to Rs 5/kg, making him sell his crop at a loss of Rs 3/kg. In order to avoid this, he may enter into a forward contract, agreeing to sell wheat at Rs 10/ kg, right at the outset. So, even if the price of wheat falls ...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now