Home loan helps save on income tax
Apr 05, 2014
Source : The Times of India


BANGALORE: The deduction you can claim against the payment of interest on a home loan from your taxable income is a major saving. This is especially so as the interest component is higher than the principle amount in the initial years of the home loan tenure. The amount of interest paid can be availed as a deduction under Section 24 of the Income Tax Act under the head ‘Income from House Property' while assessing the total income for the year.

The interest paid on a home loan is deductible from the rental income of the property too. When the house is let out, the entire interest on the home loan can be deducted from the rent received without any ceiling on the amount. However, in case of a self-occupied property, the amount of interest deductible is restricted to Rs 1.50 lakhs or the actual interest paid, whichever is lower. This can be set-off against other incomes – salary, income from business etc, whereby the tax liability reduces.

When the house is self-occupied, the interest deduction can be claimed only after the house is completely constructed. Further, interest paid in the pre-construction period can also be claimed as a deduction in five equal installments, in succeeding assessment years after completion of construction.

Apart from deduction of interest paid from the taxable income, repayment of the home loan (principal amount) can also be claimed as a deduction under Section 80C of the Income Tax Act subject to some conditions.

They are:

• The construction of the house must be completed in the previous year.

• Income must be generated from a property which is taxable under the head ‘Income from House Property’ or it is deemed income from a house property according to Section 23(2) of the Income Tax Act.

• The amount of benefit is restricted to Rs 1 lakh (as the maximum deduction under Section 80C to Section 80CCE cannot exceed Rs 1 lakh). The other amounts which also qualify under this Section are payment of life insurance premium, contribution to Provident Fund, purchase of NSC etc, the overall limit for all these including repayment of home loan is Rs 1 lakh.

‘Loss from property’ can be written off

Loss from a house property arises due to claiming deduction against maintenance charges, and interest on the home loan from the rental income. If the sum of these two elements is higher than the rent received, it results in a loss. This amount can be set-off against other incomes – salary, income from business etc.

The loss from house property can be set-off against any income (salary, business income, other sources of income like interest on FD or capital gains) of the current assessment year. If the entire loss cannot be set-off in the same assessment year it can be carried forward to the next eight assessment years. However, the amount of loss carried forward can then be set-off only against ‘Income from House Property’ and not against any other income in the subsequent years.

Some factors to consider for prospective borrowers

Apart from considering the tax advantage while taking a home loan, these factors also have to be borne in mind:

• Identification of the property

• Title to the property

• Earning and repayment capacity

• Initial margin money which is has to be paid

It is desirable and advantageous to think of buying a house at a younger age as the repayment capacity will be better as there will not be any other major commitments such as children’s education, major healthcare expenses etc. Availing a home loan at a young age will also inculcate financial discipline and you can become debt-free sooner, well before retirement.

Making a financial plan

A financial plan varies from person to person – needs, commitments, returns on investments, insurance cover (both life and medical), the availability of funds/resources (investible money) etc. A financial plan and investments should be made keeping in view various factors. The investments should have a mix. They should be both long-term and short-term, and should also bring you the advantage of capital appreciation.

Short-term investments are needed for liquidity – in case of immediate requirement or an emergency.

The long-term investments you plan can comprise real estate.

How it works

Rent received: Rs 2 lakhs

Less: 30 percent standard deduction – maintenance charges: Rs 60,000 Interest paid: Rs 1,50,000

Total: Rs 2,10,000

Loss from house property: Rs 10,000

Latest Realty News

Should you make 20% down payment for your home
Apr 05, 2014
BANGALORE: Pragnya and Atul Abhayankar are couple based in Mumbai. Having reached middle management positions in their respective corporate careers and lived on rent for five years, they have managed to save enough to buy their first home. But even after having done extensive homework on the property and the home loans that they are eligible for, they are still unable to arrive at a decision.They are unsure about whether or not to put down 20 per cent of the total value of the property as down p
Commercial growth spurs demand for residential options in Bangalore
Apr 05, 2014
BANGALORE: With an uptake in commercial development in the north, several micro-markets are opening up for residential real estate development. Localities close to the NH7 have benefitted from the upgraded 22 km highway, with seamless link to different parts of the city via the Outer Ring Road (ORR). The north is witnessing several standalone housing projects as well as integrated developments offering residents a self-sufficient neighbourhood.
IT drives demand for commercial space in Bangalore North
Apr 05, 2014
BANGALORE: The growth in Bangalore’s commercial realty market began from the Central Business District (CBD), and expanded into the extended or Secondary Business District (SBD), south and south-east Bangalore. Over a period of time, corporates with long-term occupancy plans relocated to south-east and east Bangalore, owing to better connectivity and the availability of IT parks. With the establishment of two prominent tech parks and the location of the international airport, Bangalore north has
No cheques for property tax
Apr 03, 2014
BANGALORE: The BBMP will not accept cheques for payment of property tax from this financial year. Reason: In 2013-14 , about 8,000 property-tax cheques bounced. Not to be a loser again this year, the civic agency has banned citizens from paying property tax by cheque. Payments can be made in cash or by demand draft.
Airline, capital market models drive property sales in Bangalore
Apr 03, 2014
BANGALORE: City-based developers are thinking out-of-the box to market large-scale housing projects. And the strategies appear to be working.
Bangalore: Spurt in demand from US-based NRIs
Mar 29, 2014
BANGALORE: The availability of many investment options, favourable exchange rate, better pricing, flexible repayment options and professional property management services are all nudging NRI techies in the US, Bay area to look at Bangalore as an ideal destination to invest in.
Interest rate cut on the cards
Mar 29, 2014
BANGALORE: The Reserve Bank of India (RBI) is scheduled to announce the annual monetary policy for 2014-15 on April 1. Going by the present macro and microeconomic factors, the RBI is likely to cut the key interest rates marginally.
North Bangalore: An emerging commercial hub
Mar 29, 2014
BANGALORE: Interest in real estate peaked in north Bangalore with the setting up of the international airport in 2008. The as yet largely unexplored region boasted sizeable tracts of land at significantly lower prices. This helped the growth of commercial space in the region. Connectivity through the Outer Ring Road (ORR), the Hebbal flyover and the new expressway over Bellary Road has brought areas here into the spotlight due to easy access.
IT czars pip real estate barons in list of richest candidates
Mar 28, 2014
BANGALORE: For the first time in many years, it is not politicians with interests in real estate or the mining industry who are topping the wealth charts in the list of candidates who have filed their nominations for the 2014 Lok Sabha polls from Karnataka.
Indian IT firms expect revenue boost from US
Mar 27, 2014
BANGALORE: As more and more American manufacturing companies shift production to the US and reduce their reliance on low-cost labour in China, Indian technology outsourcing companies are expecting a big boost in revenues from their manufacturing clients.

Latest Realty News Of State

Realty Talk's