Skip to main content

Home loan tax incentives to stay in Direct Tax Code regime too

 

   There is some relief for home loan borrowers. In the revised code of Direct Taxes, the tax incentive on home loan interest payments has been retained. The Rs 1.5 lakhs deduction will continue to be available for home loan borrowers.


   The revised paper on the Direct Tax Code (DTC) released this month has proposed to continue with the existing system of deducting interest payments (up to Rs 1.5 lakhs) from the total income before calculating tax liability.


   The earlier discussion paper released in August 2009 had proposed to do away with all the exemptions, including the tax benefit on interest payment on a home loan. This, if implemented, would have made cost of borrowing higher. However, the department had also increased the exemption limit to Rs 3 lakhs from the present level of Rs 1.1 lakhs against investments in select instruments such as PPF, pension funds and life insurance schemes. The Rs 1.5 lakhs benefit against home loan interest payments will be included under the Rs 3 lakhs ceiling.


   In the DTC, the government had earlier argued that as the exemption limit against investments has been increased, taxpayers will not be affected if the benefit on interest payments on home loans is withdrawn. However, it is felt even if the interest payments on a home loan is not treated as a separate category and will be a part of the exemption limit of Rs 3 lakhs, taxpayers will benefit. As many middle income taxpayers will find it difficult to exhaust the Rs 3 lakhs ceiling, inclusion of interest payments of up to Rs 1.5 lakhs in the total exemption limit will be beneficial.


   According to analysts, the government should continue with the deductions against interest payments on home loan as a separate category, considering the contribution of the housing sector to the gross domestic product (GDP). The housing sector, with its critical linkage to many other manufacturing and services sectors, is of crucial importance. With the growing demand for homes, expanded purchase base and increased supply, and increasing home loan rates, there is a need to at least retain the tax incentives. Tax incentives play a key role in motivating prospective homebuyers to invest in property.


   Acceding to the demand, the government decided to get back to the earlier system.


Tax breaks on home loan interest

Tax benefits are available to income tax assessees who have taken a loan to either buy or build a house.

Deduction on interest paid

If these conditions are met, interest on borrowed capital is deductible up to Rs 1.5 lakhs
:


Loan is borrowed on or after April 1, 1999 to acquire or construct a house The acquisition or construction should be completed within three years from the end of the financial year in which the loan was borrowed The bank, extending the loan, certifies that the interest claimed is payable on the amount advanced for acquisition or construction of the house, or as refinance towards the principle amount outstanding under an earlier loan taken for such an acquisition or construction


If these conditions are not met, the interest amount is deductible up to Rs 30,000 only.


To claim a deduction of Rs 30,000, these conditions have to be met:
Loan is borrowed before April 1, 1999 to purchase, construct, reconstruct, repair or renew a house The loan is borrowed on or after April 1, 1999, but the construction is not completed within three years from the end of the year, in which the loan is borrowed.

 

Popular posts from this blog

Retirement planning from a long-term perspective

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds     `HOW green was my valley'. This title comes from a movie I had watched many years ago. A little boy's journey into adulthood and the story of a Welsh valley's turn of-the-century descent from pristine paradise to despoiled coal mining.   I thought of the title because it is comparatively reflective of a person's life ­ the glorious years when he is earning and the sun down years when he is not having his regular job and, hence, his living standards comes down. The reason is a combination of things. Inflation of food items, transport, increase in health related costs in the later years of life and increase in expenses in almost all basic amenities of life. In India, the social security system is almost non-existent. In some states, wherever it is available, the scales of benefits are extremely modest...

Investment Strategy - What is Sector Rotation Theory?

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India)   The economy goes through cycles : it expands for a few years and then contracts. Study of historical data suggests that different sectors tend to perform well on the stock markets during different stages of the economic cycle. While history never repeats itself exactly, some broad patterns tend to recur. Investors can take advantage of the sector rotation theory to move their money from those sectors that have seen their best times to those that are likely to do well in future.   The person who developed the sector rotation theory is Sam Stovall, chief investment strategist at Standard & Poor's. He developed this theory by studying data on economic cycles going as far back as 1854 provided by the National Bureau of Economic Research ( NBER ) of the US.   When trying to correlate stock-market perfor...

CNX Midcap vs BNP Paribas Midcap Fund

BNP Paribas Midcap Fund - Invest Online   Te  performance of BNP Paribas Midcap Fund  – which has across the last 3 years generated superior returns over the benchmark – especially when the markets have gone down the fund has handsomely outperformed the benchmark preserving the capital of the investors. The fund has been able to do this only due to the superior stock selection process ( BMV approach) that is diligently followed at BNPP.   Highlights of BNP Paribas Mid Cap Fund:   Investment Objective : BNP Paribas Mid Cap Fund gives an investor exposure to invest in the various quality midcap stocks. The fund also has some exposure to large as well as small cap stocks.   Investment Approach : BMV ( Quality and scalability of Business →Good Management → Reasonable Valuation ) with Bottom-up stock picking.   Most of the investors are way happier if the fund that they have invested in is a significant Outperformer in tough times than in Good ti...

Rajiv Gandhi Equity Savings Scheme (RGESS) set for launch this week

The finance ministry is set to notify the Rajiv Gandhi Equity Savings Scheme ( RGESS ) this week.   Though Finance Minister PChidambaram had approved on September 21, the scheme announced in this year's Budget, and had said that the revenue department will notify the scheme and the Securities and Exchange Board of India ( Sebi ) would issue relevant circulars within two weeks, it is yet to become operational.   A senior finance ministry official said the revenue department was expected to notify the scheme any day now to attract retail investors to the equity segment.   He added that Sebi was not required to issue any circular for the operationalisation of the scheme and that after the issuance of the revenue department's notification, investors would be able to avail of the benefits of the scheme.   The official accepted that implementation of the scheme had been delayed due to the deliberations on inclusion of mutual funds ( MF ) in it.   ...

LIC's JEEVAN SHIKHAR

  LIC's Jeevan Shikhar is a participating, non-linked, saving cum protection single premium plan wherein the risk cover is ten times of Tabular Single Premium. The proposer will have an option to choose the Maturity Sum Assured. The premium payable shall depend on the chosen amount of Maturity Sum Assured and age at entry of the life assured. This plan also takes care of liquidity need through its loan facility. The plan will be open for sale for a maximum period of 120 days from the date of launch. 1.   BENEFITS   : a) Death Benefit: On death during first five policy years: Before the date of commencement of risk   :   Refund of Single Premium without interest. Single Premium mentioned above shall not include any extra amount if charged under the policy due to underwriting decision and taxes. After the date of commencement of risk   : "Sum Assured on Death" equal to 10 times the tabular single premium shall be payable. On death after completion of five policy years but b...
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