Loan special Home loan tax implications

Normal 0 false false false EN-US X-NONE X-NONE /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin-top:0in; mso-para-margin-right:0in; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0in; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:"Times New Roman"; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin;}   Both the principal and the interest components of home loansoffer attractive tax benefits   Availing a home loan does not just make you the owner of a house , it also brings with it attractive tax benefits. Under section 80C of the Income Tax Act, investments inspecified instruments up to Rs 1 lakh annually are deductible from an individual'staxable income. Also included under this section are principal repayments on ahome loan. So, in case you take a home loan, any payments you make towardsrepayment of the principal is deducted from your taxable income up to an amountof Rs 1 lakh. Besides the principal, the interest component of a home loan also offers tax benefits . Your interest payments are considered as an expense underthe head `Income from house property' and are deductible up to an amount of Rs1.5 lakh per annum. Joint applicants, who are also joint owners, are eligiblefor tax benefits in the proportion of their share in the loan. The interesting part is that both spouses can claim benefits up to the maximumlimit. Let's take the case of a couple who buy a home jointly (each owning 50 per cent) and take a loan for it.If the interest and principal paid for the loan is Rs 3 lakh and Rs 1.20 lakh,respectively, each of them can claim Rs 1.50 lakh as interest deduction. Thisis also the maximum amount that an individual can claim. For the purpose of tax planning, the spouse earning with thehigher salary should claim a higher share to maximise his/her tax relief. Alwaysplan your tax savings after taking all the loan benefits into account, whichare the deduction and the rebate. All banks and financing institutions usuallyissue a provisional certificate at the beginning of the year. This is based onthe Equated Monthly Installments (EMIs) payable in the financial year, with thebreakup of the interest and principal to be paid. This will give you anapproximate idea of how much principal and interest has to be paid in thatyear. Accordingly, see how this translates into a rebate or interest deduction.Based on such projections, you can assess your income and plan for otherinvestments such as tax-saving bonds and life insurance to save tax. At the endof the year, you will get an original certificate based on the actual EMIs paidfor that year. This certificate has to be submitted along with the income tax returnsto claim the deduction. Fixing home loan rates One has to be careful about themanner in which the rates are fixed on a particular floating rate loan. Whilethere is a benchmark rate present, one needs to take into consideration itsnature, which can influence the way a rate is fixed. There have been severalexamples where the bank or financial institution actually fixed a separatebenchmark rate for its housing loans ,which moves and behaves differently from the prime lending rate of the bank. This gives the financial institution flexibility to makeseveral changes in the benchmark rate without having to rest all the loans intheir portfolio. When a larger action has to be initiated, only then the primelending rate is touched. This has also led to a situation wherein severalborrowers have complained about the manner in which the rates move underdifferent circumstances. When the rates start falling, the revision in the rates is slower than theoverall fall. However, when the rates start rising, the rise in the floating loan rates aremuch faster than the overall rise. New and existing loans the loan rate change benefit is available only in a fewsectors. There are times when the lending bank or institution changes or lowersthe rate on a floating rate loan. But, before existing borrowers can rejoicecomes the news that the new lower rates will be applicable only to newborrowers who will be taking loans during a certain period. This makes the entire move worthless for the existing floating rate loanborrowers because there is no change in the rates as far as they are concerned.There is also a slim chance that a person will go in for another loan to purchase ahouse because this is a large purchasethat occurs at infrequent intervals. How the spread works One term that is important to understand the fixing ofrates as far as floating rate loans are concerned is the spread. Often borrowers are impacted by a subtle change initiated by banks. The loanfor a particular customer is decided on the basis of a benchmark rate. This canbe a 50 basis points spread over the benchmark rate. In such a position, borrowers could find that even thoughthere is no change in the loan rates, they have to pay a higher cost becausethe bank has changed the spread to 75 basis points over the benchmark. In thissituation, the borrowers will find that the loan cost has gone up by 25 basispoints for them. However, this can be changed only in specific conditions and hence it is theterminology used for the entire loan that is important. All this seems to be aminute part of the entire process, but is of great importance to a borrower.   Courtesy: HTEstates 20 th Feb 2010 For more information regarding apartment in gurgaon, bedroomapartments, buy property in india, commercial complex in india, commercial realestate, commercial space in gurgaon, dealers, flats for sale, indian realestate investment, investment options in real estate, luxurious flats, malls,office space, office space in gurgaon, online real estate, penthouses gurgaon,plots, property consultants, property in gurgaon, property india, propertyinvestment, real estate company, real estate developer, real estate gurgaon,real estate in india, real estate investment strategies, real estate market,real estate news, real estate portals, realtors, realty, residence, residentialreal estate, sell property, shop, villas, Residential Apartment   Visit www.zameen-zaidad.com          www.propertycafeteria.com

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