Skip to main content

Home Loan Tax Benefits

Apply Home Loan Online
 
 
 
2016 is looking to be one of the best years for home buyers. More tax benefits, rate cuts on loans, stagnant property prices, new launches in the `affordable' segment with freebies and attractive payment schemes. Many of you will 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 burn a hole unless you know the rules well. Heregoes a list of six lesserknown and often-missed tax benefits on home loans.

You can claim tax benefit on interest paid even if you missed an EMI.

Unlike the deduction on property taxes or principal repayment of home loan, which are available on `paid' basis, the deduction on interest is available on accrual basis. Meaning, 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. "Section 24 clearly mentions the words "paid or payable" in respect of interest payment on housing loan.Hence, it can be claimed as a deduction so long as the interest liability is there. However, retain the documents showing the deduction so that you can substantiate if questioned by tax authorities. The principal repayment deduction under Section 80C, however, is available only on actual repayments.

Processing fee is tax deductible.

Most taxpayers are unaware that charges relaed to their loan qualify for tax deduction. As per law, these charges are considered as interest and therefore deduction on the same can be claimed. Under the Income Tax Act, Section 2(28a) defines the term interest as `interest payable in any manner in respect of any money borrowed or debt incurred (including a deposit, claim or other similar right or obligation)'. This includes any service fee or other charge in respect of the loan amount. Moreover, there is a tribunal judgement which held that processing fee is linked to services rendered by the bank in relation to loan granted and is thus covered under service fee. Therefore, it is eligible for deduction under Section 24 against income from house property .Other charges also come under this category but penal charges do not.

Principal repayment tax benefit is reversed if you sell before 5 years.

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. As per rules, any deduction claimed under Section 80C in respect to principal repayment of housing loan, would get reversed and added to your annual taxable income in the year in which the property is sold and you will be taxed at current rates. Thankfully , the loan amortisation tables are such that the repayment schedule is interest heavy and the tax-reversal rule only apply to Section 80C.

Loans from relatives and friends is eligible for tax deduction.

You can claim a deduction under Section 24 for interest repayment on loans taken from from anyone provided the purpose of the loan is purchase or construction of a property . You can also claim deduction for money borrowed from individuals for reconstruction and repairs of property . It does not have to be from a bank. For tax purposes, the loan is not relevant, the usage is. The taxpayer should be able to satisfy the assessing officer how the loan has been utilised for constructing or purchasing a house property and completion of construction was within five years and other conditions are met. Remember, the lender must also file an income-tax return reporting the interest income and paying tax on it. The interest charged should be reasonable and a legal certificate of interest should be provided by the lender along with name, address and PAN. This rule, however, is only applicable for interest repayment. You will lose all tax benefits for principal repayment if you do not borrow from a scheduled bank or employer. The additional benefit of `50,000 under Section 80EE is also not available.

You may not be eligible for tax break even if you are just a cobor rower.

You cannot claim a tax break on a home loan even if you may be the one who is paying the EMI. For one, if your parents own a property for which you are paying the EMIs, you can't claim breaks unless you co-own the property . You have to be both an owner and a borrower to claim benefits. If either of the titles are missing you are not eligible. Even if you own a property with your spouse, you can't claim deductions if your name's not on the loan book as a coborrower.

You can claim pre-construction period interest for up to 5 years.

You know you can start claiming your know you can start claiming your home loan benefits once the construction is complete and you receive possession. So, what happens to the installments you made during the construction or before you got the keys to the house? As per rules, you cannot claim principal repayment but interest paid during the period can be accrued and claimed post-possession. The law provides a deferred deduction on the interest payable during pre-construction period. The deduction on such interest is available equally over a period of 5 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...

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...

Stocks with a high dividend yield

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India) Stocks with a high-dividend yield can provide investors additional cash flow. More importantly, it is tax-free   With April 2011 just over, the 'earnings season' is well and truly here. This is the time most companies pay out a portion of their profits as dividends to shareholders. Since dividends are tax-free, they are an attractive income source with a select class of investors, who depend on these for additional cash flow. SIGNIFICANCE A company doing well and generating profits will usually be in a position to declare dividends regularly. Hence, a key parameter one should look at whilst investing in a stock is whether the company has a good dividend record. Typically, dividend yield stocks are large-caps and generally not capital-intensive. This is suggestive of the fact that the downside risk on...

Systematic withdrawal plan

  Start Systematic withdrawal plan Online Although an SWP gives you regular income and saves on taxes in the long term, you cannot open an SWP on a scheme where you have an ongoing SIP   iStockPhoto If you are planning to take a sabbatical from work or are retiring soon, you may be looking at different investment options that give a regular income. Usually, a lump sum is invested to get regular fixed amounts later. Popular products include post office monthly income scheme, Senior Citizens' Savings Scheme and monthly income plans (MIPs). A lesser known option is the systematic withdrawal plan (SWP) in mutual funds. Recently, some funds have even removed the exit load on SWPs if you were to withdraw up to 15-20% in the first year, to encourage people who want to start investing in this instrument. Here is a look at what an SWP is. WHAT IS SWP? Many of us would be familiar with a systematic investment plan (SIP ), where a corpus ...

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...
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