Is interest on home loan taken from friends and relatives eligible for income tax exemption under section 24?
— Pinaki Ghosh You can take a home loan from your friends or relatives and claim tax deduction benefits under section 24 (b) for interest paid on the loan. However, the claim of interest shall be restricted to ` 1,50,000 per annum if the house is used for own residence, but in case the property is let out, you can claim full interest. No deduction is available for principal payment under Section 80 C in respect of loans taken from friends and relatives. Tax benefits under Section 80 C shall only be available if the loan has been taken from specified institutions like banks, housing finance companies, governments, public limited companies etc.
I f required, during t he assessment proceedings you will need to provide proof that the loan given by friends or relatives was used for the purpose of acquiring or constructing the house property. You will also need to obtain a certificate from your friends
or relatives broadly on these lines that a bank gives for tax deduction purposes.
I’m planning to generate my CIBIL score as I intend taking a home loan. This is the first time that I’m generating the score. Would you be able to help me with the link and the relevant details required?
— Shikha Sharma You can get the credit score along with a credit report by applying online and answering three authentication question correctly out of the five questions related with banking and credit transactions. The fee payable for obtaining the CIBIL score is ` 470 which needs to be paid online. The link for the same is http:// www.cibil.com/credit-score
The questions are related to loans and credit cards so please
keep these details handy when you apply online for the CIBIL score. If your authentication is successful, you can instantly access your credit score and a soft copy of the same will be mailed to you.
In case you are not able to get the report online, you can make an application for getting it offline by following the process described on the above link by attaching the proof of payment made. Alternatively, you can directly make an offline application for the CIBIL credit score and your copy of the credit score will be sent by courier.
You can also get a copy of your own credit report without the scores by downloading the form and forwarding it to CIBIL with a demand draft of ` 154 along with your i dentity documents men-
tioned. CIBIL will send you your credit report by post.
I have booked a flat which will be handed over in December 2014. Is pre-EMI a good option in this case?
—Shikha Tonk Pre-EMI is the simple interest payable on a home loan taken for an under-construction property where the loan disbursement is linked to the stage of construction. This payment does not have any principal component and is only made towards the interest on the amount of loan disbursed till date. The actual loan repayment or the regular EMI will start only when the entire loan amount is disbursed to the builders.
Whatever option ( EMI or pre-EMI) you may choose, the repayment will be based on
actual amount disbursed as on date.
You do not get any tax benefits on any payments made ( whether EMI or pre- EMI interest) during the years in which the construction is yet to be completed. Tax benefits for interest and loan repayments begin only from the year in which the construction is completed. However, you can claim tax benefits before completion of the property in five equal installments beginning from the year in which possession taken. So, if a tax benefit is your consideration, please opt for pre-EMI only. If you want to quickly repay the loan, the EMI option will serve your purpose.
Harsh Roongta is CEO, Apna Paisa. He can be reached at email@example.com