When Does Your Home Loan Tax Deduction Get Revoked

A number of Sections under the Income Tax Act, 1991 falls under the category where one can claim deductions. For instance, the deduction claimed under the heads of investments or expenses that are incurred during that particular financial year.

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These home loan tax deductions help in decreasing the tax liability of an individual and by reducing their taxable income. But you must pay attention to the lock-in periods to such deductions. Otherwise, the amount of deduction claimed can further be revoked.

Let’s take a look at what are the home loan tax deductions? What are the heads under which one can claim such deductions? What are the lock-in periods?

Read- When Does Your Home Loan Tax Deduction Get Revoked

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TOP-UP LOAN: BEWARE OF TRAPS

Banks offer a facility to avail a loan in addition to the borrower’s existing Home Loan. These are known as top-up loans. Bank representatives by their smooth words influence the borrowers to avail these offers.

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But there are traps attached to these offers that the borrower should be aware of. Borrowers should not avail a loan top-up offer without taking into consideration the aftermaths of the same and should not get carried away by an offer that sounds attractive without any analysis.

Bank representatives call their prospective customers with lucrative offers and with better interest rates. The borrower may feel that these are a genuine and viable financial option. But the borrower must thoroughly examine these offers as sometimes the cost may exceed the savings of the borrower that any other bank offers him/her.   

Do a thorough analysis before taking up top-up loans without it the customer will further

Read:- TOP-UP LOAN: BEWARE OF THESE TRAPS

increase the amount of financial pressure upon him/her without any reasonable ground.

Home Loan Tax Benefit – Is It Worth it?

The home loan includes attractive tax benefits, which has been a welcome advantage. But, to take a home loan with the prime objective of enjoying tax benefits is something which needs a bit of assessment.

For this let’s first look into the available deductions for a home loan;

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a) The interest payment of the home loan is exempt u/s24, up to Rs. 2 lakhs in a year if the property is self-occupied. In case the property is rented then the exemption is available up to Rs. 2 lakhs net of taxable rental income.

b) The principal repayment of the home loan is available for deduction u/s 80C along with various other payments like LIC, FD, PPF, tax saving MF etc., for the amount up to Rs. 1.5 lakhs.

The stamp duty and registration charges are also exempt from tax.

Considering the rising prices of real estate in the present scenario, the government has made attempts to make home loan cheaper. But still, there are high chances that your loan amount could be so high that the interest exemption limit of Rs. 2 lakhs fall short. Also, the principal repayment deduction is clubbed with other payments, thus, it is definitely not able to cover for whole payment.

Therefore, taking a home loan is beneficial when you are facing a shortage of funds, in case you have enough funds for the desired property than going for a home loan will not give you enough returns on your investment.

READ:- Tax Benefit on Home Loan – Is It Worth it?

Reasons to Choose Top-up Loan

A top-up loan is a supplement to meet your financial needs, which can be easily availed over your ongoing loan from the same bank. It can be used to meet both your personal or professional requirements. It can be applied for meeting your needs like wedding expenses, medical emergencies, children’s higher education and many more.
There are multiple advantages of availing a top-up loan like you can apply for a high amount as it is calculated up to 70% of the existing home loan depending upon your eligibility.

Image result for Choose Top Up LoanAlso, since your documents are already submitted with the bank, so the process is also very fast and convenient and the interest rate levied here is very low, compared to the personal loan or loan against the collateral. Since the interest rate charged is low and the tenure is generally high for 15-20 years, the monthly installment to be paid is low, and also if you are applying for home purchase purpose, it is tax exempted. However, despite all whenever you apply for a top-up loan always compare and then invest.   

 

Home Loan Vs Loan Against Property

  • Many of us remain confused among the types of loans that are available in the market regarding their terms and conditions, interest rates, perks, etc.
  • The most common type of loans among which the people often get confused are Home Loan and Loan Against Property.
  • A home loan is taken to purchase a home or for the construction of a house which a LAP is taken to meet the fund requirements.
  • The home or property do not belong to the applicant at the time of loan application while the applicant owns the property in case of LAP.
  • The purchased home is considered as security means in case of the home loan while for LAP the loan is given by keeping the property as collateral.
  • In a home loan around 90% of the total value of the house is given as loan while in LAP 60% to 70% of the total value of the property is given as a loan.

Related:-How Loan Against Property Is Different From Home Loan

Charges Associated with Housing Loan that you must know

You need to be very cautious and aware when you plan to opt for a home loan to convert your dream into a reality as it is a cost for you that you have to bear in order to get a house. A home loan is considered as one of the best loans to build up your asset using a liability. Before applying for it one needs to be very careful and aware of all the hidden or extra charges associated with it apart from the rate of interest on your home loan.

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Buying a property is something that all of us want to have at some point in our lives, in that case, applying for a home loan is the best way. While availing this loan, do not forget to insure your home loan that will help increase your contingency reserve to include enough funds to pay a maximum of three EMIs pertaining to your loan in case of financial emergency. Similarly, if you are worried about your finances and do not know where to start, you can seek guidance from any online loan aggregators who guide first time home buyers and also suggest which is the best loan for them according to their eligibility.

Additional Reading:-Charges Associated with Home Loan that you must know

Factors that influence your Eligibility for Getting a Home Loan

A decision to buy a dream house of your own is very important and a life-altering one. Before approaching to a lender, not only do you have to be adequately prepared, in terms of finances, but apart from this, you have to ensure that the conditions are correct for your home loan at Low-interest rates application to go through smoothly. Some of the factors as discussed could become an obstacle if not taken care of within time.

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When you apply for a home loan, do not forget to check your home loan eligibility by using a home loan eligibility calculator that works on three parameters- Required Loan Amount, Rate of Interest and Loan Tenure. Home loan is something that you are getting into a long-term financial commitment with your eligible lender. Prior to getting a home loan, put in your best efforts and do your best to prepare in terms of getting your papers in order, getting the funds ready for the down payment. Besides this, your lender may also put you through a rigorous credit score or CIBIL Score assessment process to ensure that lending to you entails the minimum amount of risk.

So, do not forget to check your home loan eligibility before applying for a home loan.

Additional Reading:- Factors that influence your Eligibility for Taking a Home Loan