Skip to main content

Pre-EMI payments and tax benefits

EMIs, or equated monthly installments, have become a part of most of our lives. Right from a house, to a car or even an LCD is available on EMIs. Then there are pre-EMIs that are more common in the real estate market as many investors typically book flats in under-construction projects.

EMIs vs Pre-EMIs:

Let us assume you have bought a house in a 20-storey building by paying a token money of 50,000 — 15% of the total cost along with society charges before plinth level and 3% money with every floor slab. In that case, 20% of the amount may be disbursed when the second slab is completed and so on. In such a case, the bank will not disburse the entire loan at one go. The sanctioned loan amount is disbursed in tranches to the builder as defined in the loan agreement.


   At this stage of partial disbursements, you pay only the interest component of the disbursed amount, which is called the pre-EMI. If the project is scheduled for completion in December 2011, you would be paying pre-EMIs till then.

Pre-EMIs and Tax Benefits:

You can avail of tax benefits on the interest component of the pre-EMI only after the construction is completed. But that doesn't mean you will not get tax benefits on pre-EMIs at all. Once the construction is completed, you can show the pre-EMI interest payment in five equal installments in subsequent years. For example, if the pre-EMI payments aggregate to 5 lakh, then 1 lakh will be shown over five years. However, you cannot claim any tax exemption on the principal amount, if paid in this period. But that shouldn't deter you from partly prepaying the principal component of the loan.


   Anyway, the tax deduction for principal falls under the 1-lakh limit of Section 80C. This limit is usually exhausted for most working professionals as company PF, insurance and ELSS schemes also qualify as tax-saving investments under the same 1-lakh limit. On the other hand, any principal payment will only reduce your interest costs.

 

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...

JP Morgan launches Emerging Markets Opportunities Equity Offshore Fund

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 JP Morgan launches Emerging Markets Opportunities Equity Offshore Fund    The new fund offer opens for subscription on 16 th June and closes on 30 th June. JP Morgan Mutual Fund today announced the launch of its open end fund of fund called Emerging Markets Opportunities Equity Offshore Fund. The fund will invest in an aggressively managed portfolio of emerging market companies in the underlying fund - JPMorgan Funds - Emerging Markets Opportunities Fund, says a JP Morgan press release. Noriko Kuroki, Client Portfolio Manager, Global Emerging Markets Team (Singapore), JPMAM said, "Emerging markets have been out of favour for several years, as growth decelerated and earnings struggled. However, in a world of globalisation, we believe that EM will eventually re-couple with DM, leading to the long-aw...

Nifty F&O

  1. What is a straddle? A strategy using Nifty options usually before a major event or when one is uncertain of market direction. Comprises purchase of a Nifty call and put option of the same strike price. Usually strikes are purchased closer to the level of the underlying index. 2. What is better ­ buying or selling a straddle? It depends.Implied volatili ty of options, or near-term expectations of price swings in an un derlier like Nifty , usually peaks before an event and falls when the outcome plays out ­ like Infy re sults in past years. However, once the event plays out, a sharp rise or fall in Nifty could result in price of the straddle rising ­ benefiting buy ers. But, normally , those who sell or write options charge hefty premiums from buyers in the hope that fall in volatility would ensure the options end out-of-the-money, hurting buyers. 3. So, do straddle sellers end up winning most of the time? Yes. That's invariably the case when market volatility is trending on the...

UTI Equity Fund Invest Online

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   UTI Equity Fund   Invest Online UTI Equity is a large cap-oriented fund with assets under management worth Rs. 2,269 crore (as on June 30, 2013). The fund was originally launched in May 1992 as UTI Mastergain and is benchmarked against S&P BSE 100. A couple of years back the name of the fund was changed to UTI Equity Fund and many of the smaller funds of UTI were merged into this fund. Performance The fund has outperformed its benchmark as well as the equity diversified category average in the last one-, three- and five-year periods. It has repeated the same in 2013 (as on May 31). Since its inception the fund has delivered an impressive 26 per cent compounded annual growth rate which is superior to its benchmark performance in the same period. Y...

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...
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