Key things to know about Home Loan

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Home loan, a word that comprises your dream and liability both, while owning a “home” is a priceless happy feeling, word 'loan' brings all the apprehensions along. However, easy home loans provided by various national and international banks have simplified the process of applying for home loans and with increased competition backs are offering home-loans on very attractive interest rates. Not only banks but government of India also gives you a reason to buy your home by offering tax benefits home loans. If you are also planning to buy your home and wish to know more about home loans, here we are with the Key things to know about Home Loans, let’s read.



Key points to know before signing a Home Loan Agreement


  • Carefully read every clause mentioned in the home loan agreement document before you apply for the home loan.
  • Never trust any verbal communication or commitment. The sales professional of the bank or institute in which you are applying loan may mislead you on verbal assurances so it is always safe to keep records in writing in the loan agreement document.
  • If you notice any unjustifiable financial inference in any clause of your home loan agreement you should directly contact your bank. In case of any dissatisfaction, you can approach to consumer court for redressal.
  • Before taking decision to apply for home loan you should note that banks reserve the right to change interest rates, as per change in their internal policy or under any unforeseen circumstances.

Key things to know about sections under which you can avail tax benefit on home loan
Key things to know about sections under which you can avail tax benefit on home loans. In India Taxpayer can avail tax benefits under following sections:


  • Section 80C: Under Section 80C of the Income Tax Act, tax benefits can be availed on the principal amount of the home loan. The maximum tax deduction allowed under section 80C is Rs.1,50,000.
  • Section 24: Under Section 24 tax benefit can be availed on the interest that is paid by loan-borrower/s. Under this, the tax deduction is done on accrual basis. The maximum limit for tax deduction under this section is Rs.2 lakh.
  • Section 80EE: This section provides for additional deduction of Rs. 50,000 for Interest on Home Loan. Tax benefits under this section can be availed by first-time buyers on the amount of interest paid. The loan amount to avail tax benefit under this section cannot exceed Rs.35 lakh. The value of residential house property should not exceed 50 Lakh to avail benefit under section 80EE.

Key things about Tax Benefits on Home Loan:


  • The benefit of tax on home loan can be availed only by the home loan borrower and only property owner can claim the tax benefits.
  • In case of joint ownership, the limit of tax benefit applies to each co-owner of the property.
  • If the co-owner of property is not a co-borrower for home loan, in that case, co-owner would not be entitled to any tax benefits.
  • If co-borrower of home loan is not a co-owner of the property then co-borrower would not be able to avail any tax benefit on home loan.
  • The share of each co-borrower has to be clearly established as the benefit of tax on home loan can be availed only in the same proportion. Each joint owner gets tax benefits in the same proportion as he/she shares as a co-borrower.
  • To claim your tax benefits on home loan, you would be required to provide a certificate that clearly explains the division between principal amount and the interest which you have paid for EMIs. The housing loan company can issue this certificate.
  • In some conditions, the Tax Benefits can be reversed as well. If house is sold within 5 years from the end of the financial year in which possession of the house was given, the loan-borrower would be in loss as the tax benefits can be reversed. It will be treated as capital gains and accordingly, taxes would be charged. However, if interest payment is made under Section 24 of the IT Ac then tax benefit cannot be reversed.

Key documents to claim tax deduction against Home Loan:


  • Documents to show ownership details of the property.
  • Loan document certificate which shows the split between the principal amount and the interest paid for EMIs.
  • Document to prove the completion of the construction of the property or the date of property purchase.
  • Document of a loan in the name of the person paying tax
  • Proofs of the municipal taxes that have been paid by loan-borrower during the year.

So you are now set with all the things you should know before applying for home loans in India. Like any other financial product, home loans are also full of benefits and risks. So like a smart property buyer read, research and compare home loans offering by various financial institutions and choose the best.

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1 Comment

  • Admin

    Suresh

    16 October, 2018 at 2:08 pm

    Thanks for providing such nice information "Key things to know about Home Loan"

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