Home loan grant - principal interest exemption.

There are basically two components to a home loan installment payment. The principal amount and part of interest. An assessing principal may deduct the maximum amount of Rs.1,50,000. 

In the eyes of the income tax house, the property is divided into two parts let’s go outside the property (rented property) and self-occupied property. The interest rebate provision is different for both properties.

 

You may also like- Prepare at a time 50 Employees Form 16 Part B for the F.Y.2020-21 with the new and old tax regime U/s 115 BAC

Income Tax Act 1961

Deduction of interest components for self-occupied property under section 24B is Rs. 2 lakhs. The government has allowed the real estate sector to grow further by introducing a new Section 80EEA in the 2021 budget, which is already part of Chapter VI.

 

The terms and conditions of the 80EE section and the 80EEA section are given below. 

Deduction under Section 80EE

A person is eligible for exemption under Section 80E with a maximum limit of Rs 50,000. 

Terms

1. The value of the house should be less than Rs 50 lakh 

2. Will have to be sanctioned during 2016-17

3. The approved amount should be less than Rs. 35 lakhs

4. The assessor should not have any residential house on the date of approval. 

Deduction under this section will remain available until payment is made.

You may also like- Prepare at a time 100 Employees Form 16 Part B for the F.Y.2020-21 with the new and old tax regime U/s 115 BAC

 

Deduction up to a maximum of Rs 2 Lacks. Under Section 24, In case of a loan taken for the acquisition of a self-occupied property, Rs.200,000 is available under Section 24 for the interest paid on the loan. 

Deduction Under Section 80EEA

To encourage the real estate sector and to provide additional rebates to the taxpayer, the government introduced more concessions in the Home Loan n 2021 budget. 

The conditions for being satisfied for a waiver under section 80EEA are as follows: 

1. It should be approved by any financial institution between April 2019 and March 31, 2021.

 

2. 80 80EE deductions should not be claimed in case of individual

 

3. There should be no separate residential house on the date of approval

 

4. The stamp duty value of the house is 45 lakh

Deduction benefits under this section are available from A.Y. Y 2020-21 and up to the year of subsequent assessment.

 

This means that the availability of additional discounts approved under 80EEA (Income Tax Act) for interest paid on affordable housing loans in Budget 2021 has been increased to 31 March 2022 within one year. Before the announcement of the budget for 2021, until March 21, 2021.

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On June 26, 2021 by www.taxexcel.net

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• Investments Qualifying for deduction under section 80C Max Rs. 1.5 Lakh

On January 09, 2020 by www.taxexcel.net

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Would I be able to guarantee Tax Benefit for both HRA and Home Loan?

An the inquiry which is regularly posted by many citizens. This is for the most part in light of the fact that numerous businesses don't permit both tax reductions together in specific circumstances. Shockingly this isn't the best activity.

On June 28, 2019 by www.taxexcel.net

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Both HRA and Home Loan Interest tax sections are unrelated. You claim tax benefit on HRA (House Rent Allowance) under section 10(13A) while the tax benefit on payment of interest on home loan comes under section 24(b). However, there can be issues if both the sections are used together with the intent of tax evasion.

On January 21, 2019 by www.taxexcel.net

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Generally all of us think that taking a loan to buy a residential property is not a good idea and so, they start saving some amount from their monthly income into recurring investment or a Systematic Investment Plan (SIP) offered by mutual funds. But the financial planners recommend that for acquiring a house for self use, one should go for a housing loan and pay EMIs in place of going for recurring investment or SIP in other investment product.

On September 27, 2017 by www.taxexcel.net

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Exemption on interest

In the case of a home loan taken for a self-occupied property, the principal amount repaid up to Rs 1 lakh qualifies for deduction under Section 80C, while up to Rs 1.5 lakh of interest paid is tax-deductible under Section 24B.

However, in the case of a home loan for the second property, only interest payment is eligible for deduction. No tax benefit is available on the principal repayment of the second loan. However, the good part is that there is no limit on the deduction for interest payment on the second loan. This is because the second house has been given out on rent.

Download All in One Value of Perquisite Calculator in Excel

In case the house is yet to be constructed, 20% of the total interest paid during the preconstruction period is also allowed as the tax deduction. This is available for five years from the time the construction is complete till you get possession.

Deductions allowed on income from second home

Even if the second house is lying vacant, the Income Tax Department will consider that it has a rental value. The notional or deemed income (see How income is computed) will be added to your taxable income.

Sonu Iyer, tax partner, Ernst & Young, says, "A buyer can deduct expenses, such as municipal or property taxes actually paid, from the deemed income. Other than this, 30% of the net annual value, which is the difference between the rental income and municipal taxes, is also allowed as deduction. In case the house is rented out, 30% of the actual rent can be deducted from the taxable income, apart from deductions for local and municipal taxes."

After deducting such expenses from the income that you earn from the property, if you incur a loss, you have the option to set it off as follows:

The current year's loss will first be set off against any other income from the property.

. It can also be set off against other incomes, such as that from salary, business or profession, and capital gains, earned in the current year.

. If your balance continues to be in the red, you can carry forward the loss for up to eight years. However, the amount that is carried forward is only allowed to be set off against the income that is earned from a house.

How to save on taxes

If you own several houses, you can choose one as your primary residence. The income from this property will be treated as nil and exempt from tax, even if you have actually rented it out. It is for this house that the limit of Rs 1.5 lakh applies for deduction on loan interest.

The entire interest on the loan taken for the other house, the income from which is taxable, can be deducted from your income. This applies to any number of nonexempt houses that you may own.

So, to maximizes your savings, consider the house with the highest loan as the non-exempt one. However, make sure that the interest payment on this loan is higher than the principal-cum-interest payment on the other loan.

Additionally, if you give your second house on rent for more than 300 days in a year, it will not be subject to wealth tax, which is levied at the rate of 1% on wealth that is in excess of Rs 30 lakh.

If any of the houses is sold after three years, the profit will be taxable as long-term capital gains. However, there are beneficial provisions under which this gain is exempt from tax. So if you invest the money to construct a house within three years or buy another house within two years, your income will be tax-exempt.

However, the exemption is reversed and the amount taxed as capital gain if the new property is sold within three years of being constructed/purchased.

This will be considered a short-term gain and taxed according to your slab rates. You can also save tax if you invest the profit in a special bank account under the capital gain account scheme. A similar exemption is available for investments of up to Rs 50 lakh in bonds, which are redeemable after three years. This investment should be made within six months of the sale.

On August 23, 2016 by www.taxexcel.net

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Buying property by taking home loan is easy today. We have number of home loan options. Prior to taking home loan we check about an applicable rate of interest because EMI is decided based on this interest rate. But, we simply ignore other applicable charges while taking a home loan. Let’s take a look at 20 Hidden charges on Home Loan.

20 Hidden Charges on Home Loan you must know

Rate of Interest :- Before take a Home Loan, check the Rate of Interest as Fixt Rate or Fluctuate Rate. Alwyas take the loadn as Fixt Rate basis.

Processing Fee

A processing fee is nonrefundable charges applicable for processing a home loan. This charge varies from bank to bank.  It is usually in the range of 1500 Rs to 2000 Rs or 0.5% to 1% of the home loan amount.

Administrative Fee

The administrative fee is hidden charges charged by banks separately. These charges are levied for processing your home loan application. Only few banks have removed this fee so you must check with the bank for the applicable administrative fee on the home loan.

Valuation or Inspection Fees

If you are planning to purchase high-value property, this charge may be applicable to you. Bank carryout valuation before sanctioning the loan fees applicable for this valuation is known a valuation or inspection fees. The majority of banks are not taking this fee, however, few public sector banks still charge this fee.

Legal Charges

Banks also incur some charges from the customer for legal and technical verification of the property. It is known as legal charges.

Notary Fees

If you are NRI and applying for a home loan then you need to get your KYC and Power of Attorney notarized by the Indian embassy. In such cases the bank will ask fees of the notary from you.

Franking fee on sale deed

In certain states like Maharashtra and Karnataka, you need to carry out franking on sale deed.  This fee varies based on sale deed value it is usually 0.1-0.2% of the home loan.

Intimation or registration fee

You need to intimate subregisterar’s office about mortgage information. It is a newly started process and followed only in Maharashtra state. Fees charged for this is known as intimation fees.

Indemnity Cost

In case of certain banks, the borrower of property need to give assurance to the lender about various risks like a delay from builder end for receiving approval or the property tax on property is yet not paid by seller etc.  This cost is known as Indemnity cost.

Fire Insurance or property Insurance Fee

Some banks make it mandatory to take fire or property insurance. You need to either take this insurance or you need to pay fee applicable for taking this insurance.

Cheque Bounce Charges

If you are unable to pay home loan EMI on time or if cheque given by you for EMI bounced bank will impose charges. This charge is known as cheque bounce charges.

Conversion Fees

Some banks like HDFC Ltd gives an option to the customer for reducing applicable home loan rate by switching to lower interest rate scheme. The fee charged towards this conversion is known as conversion fees.

Pre-Payment Charges

Pre-payment charges are not applicable with the floating rate interest home loan. However, for fixed rate interest home loan majority of bank impose pre-payment charges.

Document Retrieval Charges

Document retrieval charges are the charge imposed at the time of closing home loan. This charge is for transferring original documents to the borrower from the central repository. Suppose you have taken home loan from ICICI bank. ICICI bank stores all documents at central place say Mumbai, in case of closure of loan all this documents to be retrieved/courier to branch from where you are closing the loan. This charge is known as document retrieval charges.

MODT Charges

MODT means Memorandum for deposit of title deed.  It is charge applicable to you as a home loan borrower for the undertaking given by you that you are depositing the title documents of the property with the bank and bank will return this document after loan closure. Some banks ask for registering this undertaking on the stamp.

Delayed Payment Charges

Suppose you have taken a home loan and you are unable to pay EMI on time due to various reason. Bank will impose a penalty for delay. It is known as delayed payment charges.

Switching loan charges

Suppose you want to switch your loan from floating to fix or to any other good home loan scheme of the bank. Bank will charge additional money this charge is known as switching loan charges.

Changing loan tenure

Certain banks will impose a fee for changing home loan tenure. This charge varies from bank to bank.

Statement of Account

Every year bank sends a statement of account for the home loan. If you misplace this statement of account and if you are in need to issuing new statement bank will ask for additional payment.

Duplicate Document Charges

You must keep Xerox copy of all original documents submitted by you to the bank. If you are in need to Xerox copy at a later stage you need to pay extra money to the bank. It is known as duplicate document charges.

List of Documents

You may be surprised to note that several bank also ask for money if you want to know the list of a document submitted by you to bank at home loan disbursement stage.

Conclusion -

When you take a home loan, you are not only paying EMI on the home loan. You are paying multiple other hidden charges which make your home loan costlier.

Make sure to check all applicable charges before taking home Loan.

Hope you find this post useful. Do post your query about the home loan in the comment section.      

On December 25, 2015 by www.taxexcel.net

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Download All in One TDS on Salary for Govt and Non Govt Employees for F.Y.2015-16 [This Excel Utility can prepare at a time Tax Calculation Sheet + Salary Structure + Automatic HRA Exemption Calculation + Form 16 Part A&B and Part B for A.Y.2016-17 ]

1. No Hike in basic exemption Tax limit

The first disappointment comes in the form of no increase in the basic exemption limit. This means the tax slab will remain same for the financial year 2015-16 i.e. assessment year 2106-17 but the surcharge rate of 10% is increased to 12% for the tax payers having income above Rs.1 crore. This increment in the surcharge rate is made to compensate the income from the abolished wealth tax.

2. Section 80C ceiling limit remains Rs.1.50 lakhs per annum

With the inclusion of Sukanya Samriddhi Account Max limit Rs.1.5 Lakh and equity oriented pension funds Max Rs.1.5 Lakh, there was an inevitable need of expanding the threshold limit of section 80C but that did not happen. Section 80C remains intact in budget 2015.

3. Rise in the Health Insurance Premium paid u/s 80D

To spread the health care awareness among individual tax payers, section 80D has been amended by increasing the deduction limit for the premium paid for health insurance to Rs.25,000 for non-senior individuals (earlier Rs.15,000) and Rs.30,000 for senior citizens (earlier Rs.20,000). For super senior citizens (80 years or more) who are not eligible for health insurance get some relief in terms of deduction towards their medical expenses up to Rs.30,000 per year.

4. Additional Tax-Savings under Section 80DD, Section 80DDB and Section 80U

In view of the steep rise in the cost of the medical care, Government has increased deduction limit under section 80U and section 80DD by Rs.25,000 i.e. medical expense of disabled individual and dependent on Individual, from existing Rs.50,000 to Rs.75,000 and in case of severe disability the addition amounts to Rs.50,000 i.e. from existing Rs.1,00,000 to Rs.1,50,000.

Further, Government has also given additional tax sop of Rs.20,000 (from Rs.60,000 to Rs.80,000) on the medical treatment of some specific diseases such as cancer, AIDS etc. for very senior citizens (aged 80 years or more) under section 80DDB.

5. Transport Allowance Doubled

The transport allowance cost has witnessed some sharp increase and to cope up with that Government has doubled the transport allowance from existing Rs.800 per month to Rs.1,600 per month which totaled to Rs.19,200 per year.

6. Home Loan Interest Deductions remains Intact

The limit of home loan interest deduction u/s 24 was hiked in the interim budget last year to Rs.2 lakhs. But with the rising cost of property, there was a need of increasing this deduction limit to Rs.3 lakhs which was not met. So the ceiling limit of home loan interest for the self-occupied property remains intact at Rs.2 lakhs per year under section 24(b).

7. National Pension Scheme u/s 80CCD increased by Rs.50,000

Investments towards National Pension Scheme has got some additional tax sops of Rs.50,000 over and above the Section 80C ceiling limit of Rs.1.50 lakhs.

Deduction limit of investment towards pension plans, annuity plans and new pension scheme is hiked to Rs.1.50 lakhs from earlier threshold limit of Rs.1 lakhs. In the previous budget, the limit of section 80C was hiked but the deduction limit for pension plans capped to Rs.1 lakh only; now, budget 2015 has removed that anomaly.

Summary of all Deductions

8. Service tax rate increased to 14%

A major hit to the common men comes in the guise of service tax. Budget 2015-16 has hiked the service tax rate from existing 12.36 to 14%. This means now every service such as eating food outside, paying your mobile or gymnasium bills etc. would attract extra tax.

On August 10, 2015 by www.taxexcel.net

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Download All in One TDS on Salary for Govt and Non Govt Employees for the Financial Year 2015-16 & Ass Yr 2016-17 [ This Excel Utility can prepare at a time your Tax Compute Sheet + Salary Structure +Automatic HRA Calculation + Automatic Arrears Relief Calculation with Form 10E + Form 16 Part A&B and Part B ]

 

A payee can get tax benefits through home loan under two different Sections of Income Tax Act.

• Under Section 24- Deduction on interest on home loan for self-occupied property up to Rs 2 lakh.
• Under Section 80C- Deduction on repayment of principal amount on home loan up to Rs 1.5 lakh.
• U/s  80EE :- Deduction on interest on home loan up to Rs. 1 lakh ,the deduction can be availed who are get the HBL Int after 01/04/2013 on or after.

Tax benefits under Section 24 and Section 80C and U/s 80EE: Mr. X is eligible to claim tax benefits under Section 80C for the principal repayment of the home loan and under Section 24 for interest components. He can claim deduction up toRs 1.5 lakh along with all other permissible instruments like, life insurance premium, PPF, ELSS, NSC etc under Section 80 C and up to Rs 2 lakh under Section 24.

Another Rs. 1 Lakh U/s 80EE as HBL Interest w.e.f. 01/04/2013.

Tax Benefits on Joint Home Loan: One can avail tax benefit on home loan up to Rs 1.5 lakh under Section 80C and 2 lakh under Section 24. But if you go for a joint home loan along with your spouse in the ratio of 50: 50, then both of you can claim these benefits separately. So the combined limit will beRs 3 lakh under Section 80C and 4 lakh under Section 24. This can reduce your overall cost of loan for the family considerably.

Total deduction will be Rs 7 lakh and if both spouses are in the highest tax slab, they will get a tax benefit of Rs 210000/- which is just double compared to an individual home loan, although this provision may vary from person to person.

Before going for a joint home loan, you should mutually work out your ownership share if you wish to optimize the tax benefit. That is, if you and your spouse own the house jointly in the ratio of 50:50, both can claim deductions in equal proportion. Therefore, if your tax slabs are different, you need to work out your ownership share in a manner that the spouse in the higher tax bracket owns a bigger share.

Please note that it is essential to be co-owners to be eligible for tax benefits. The co-ownership share also plays a role in determining your deductions.

On April 25, 2015 by www.taxexcel.net

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