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When Banks Compete, you win.
Apply for a Home Loan at ApnaPaisa and we will match your requirements with the best offers from our network of over 400 service providers. We will get a maximum of five providers to compete for your business. WHEN BANKS COMPETE YOU WIN. You can then decide which home loan is best for you based on:
- Lowest Interest Rate
- Lowest EMI
- No Pre-payment charges
- Lowest Processing Fees
- Maximum Eligible Loan Amount
- Mandatory Documents Required
- Lowest Processing Fees
Or any other factor that is important to you.
Negotiating Tips
1) If you have a good credit record and your income is sufficient to justify the loan you can negotiate on interest rates. You can also try and get Processing fees or legal or valuation fees reduced or completely waived.
2) If you go for a floating rate loan then pre-payment charges are not payable.
3) When interest rates are high and are expected to go down you should go in for a floating rate loan as it makes no sense to lock into high fixed rates or the so called Dual rate loans where rates remain fixed for a couple of years before shifting to regular floating rate loans. Please review this decision at least once every 6 months
4) Take term insurance and critical illness and accidental disability policy for the full loan amount to make sure you or your loved ones don't have to worry about loan repayment should you die or are disabled due to a critical illness or accident. You cannot be forced to buy this policy from the insurance company chosen by the lender - you should choose your own insurer.
You can claim both Exemption for House Rent Allowance and deduction for interest on home loans
Claiming tax deudction benefit on home loan interest is delinked to tax exemption on HRA.Harsh Roongta
31 Aug 2009
A very frequently asked question, justifiably so is, Can I get both, exemption of HRA as well as deduction in respect of home loan?
It's a common practice these days for most of us to either relocate for jobs in other cities with an intention to come back to the home city at a future date.
Even if we live in the same city where we work, traveling distances can be quite daunting. Imagine traveling to work in Colaba from Virar everyday.
And, we always have a work around. If we relocate, we live on rent in the new city, continue to live on rent and continue to own the property that we had back home.
Some of us continue to live on rent in the same city as our work-place because the rented premises is more convenient even though we have our own houses in the same city. In both the cases, what if we want to claim tax benefits on the home taken, as well as, claim exemption for our rented house. Is it possible. How?
The simplest answer to this question is, Yes, it is possible to claim both simultaneously. What is popularly not known is that claiming deduction for interest payable on a home loan and claiming exemption for HRA in respect of rent paid for the rented property is completely de-linked. There is no restriction under the Income Tax Act with respect to claims for both.
The exemption of HRA is covered under Section 10 (13A). Simply speaking, the only conditions for allowing the exemption of HRA are:
Rent must actually be paid by the assessee (legal term for the person whose tax liability is being worked out) for the rented premises which he occupies, the rented premises must not be owned by him.
As long as the rented premises are not owned by the assessee, the exemption of HRA will be available up to the limits specified in the relevant rules. There is no mention here about any effect on the exemption because of ownership of any other property.
Let us now turn to the deduction of interest payable on a home loan. The interest is not a straight deduction allowed from the salary income. The deduction is actually allowed while calculating the income from house property; although the effect (as we will see below), in the case of self occupied property, is the same as allowing it as direct deduction from salary income.
The relevant sections are Section 22 to Section 27.
Putting it simply, the calculation of income from house property is done as under:
|
Rental income (net of municipal taxes) = Annual Value |
A |
|
Less : 30% of A as a standard deduction |
S |
|
Less: interest payable on any loan taken for acquisition or construction of this property |
I |
|
|
|
|
Income from House property A-S-I |
H |
The point that we must remember is
that income can also be negative or in other words, include a
calculation of loss.
In the case of self-occupied property,
the annual value "A" is taken as "nil"
(therefore S automatically becomes nil as 30% of 0 is 0) and I is
restricted to a maximum of Rs.1, 50, 000. Therefore, in the case of
self occupied property; the result of calculation of "income
from house property or H will always be a loss to the extent of the
interest payable on the home loan or Rs.1, 50, 000 (whichever is
lower).
Where the owned property is given on rent, the annual
value will be calculated based on the rental and the final income (or
loss) from house property will be calculated as given above. Please
note that in such a case, there is no restriction on the maximum
amount of deduction available in respect of I.
Where the owned property is lying
vacant and is neither rented out nor self-occupied, the rental that
could have been derived (had it been rented out) has to be taken as
the rental income in respect of such property and the calculation has
to be done as in point 3 above. Of course, the calculation of such a
notional value has several practical difficulties. If similar
property in the neighborhood has been given out on rent, which can
serve as a good basis to calculate this figure. There are also a
large number of case laws which have gone into the method of
calculation of such notional value. You may need expert taxation
advice to calculate this figure.
"Income from house
property" is either taxed (if it is positive) or if it is a
loss, it is allowed to be set off against the income from other heads
including salary (and hence the popular misconception that interest
on home loans is allowed as a deduction from salary income as the
impact, in the case of self occupied properties, is the same as a
direct deduction of the interest from salary income).
There is nothing in the section that affects the exemption of HRA at all. Also, there are no conditions that restrict the availability of deduction of interest based on the assessee's stay in any other premises in any city (whether the same city as the rented property or another city).
The principal amount repaid on all loans taken from specified entities such as banks/employer companies, to acquire/construct residential house property(ies) is allowed as a deduction under Section 80C; up to the overall limit of Rs. 1,00,000-mentioned in that section. This is not at all affected by the exemption of HRA in any manner.
So this way we see that claiming HRA is completely de-linked, so go for it!
Note: The proposed Direct Tax Code if actually implemented will make this issue completely irrelevant as it neither allows exemption for HRA nor a deduction for interest payable on a loan taken to acquire a self occupied property.