HT Estates - - HTESTATES - Harsh Roongta

I have taken a com­pos­ite loan of

₹ 25,00,000 for buy­ing a plot and house con­struc­tion. About 50% of that amount is for buy­ing the plot and the re­main­ing amount is for house con­struc­tion. What is the tax ex­emp­tion that I will get on the said amount?

—Manoj Gu­lati Any loan that is used for con­struct­ing a house prop­erty is el­i­gi­ble for tax de­duc­tion ben­e­fit. A com­pos­ite loan that helps you buy a plot and con­struct a house on it can jus- tifi­ably be said to have been used to “con­struct” the house prop­erty and hence you will be el­i­gi­ble for tax ben­e­fits in re­spect of the en­tire loan. How­ever, since the prop­erty is under con­struc­tion, you will get tax ben­e­fits only from the fi­nan­cial year in which the con­struc­tion is com­pleted.

If the prop­erty is go­ing to be self-oc­cu­pied, you need to en­sure that the con­struc­tion is com­pleted within three years from the end of the fi­nan­cial year in which the first loan dis­burse­ment has been made. This will en­sure that you get the max­i­mum tax ben­e­fits for in­ter­est payable on such a loan which is

₹ 2,00,000. If the con­struc­tion gets com­pleted be­yond three years, you will still be able to claim ₹ 30,000 as max­i­mum de­duc­tion. This mone­tary limit ap­plies in case of self­oc­cu­pied house prop­erty only. How­ever, if you in­tend to let out this prop­erty, you will be able to claim the tax ben­e­fits in re­spect of the en­tire in­ter­est on the loan of ₹ 25 lakh ir­re­spec­tive of when the prop­erty is com­pleted.

In re­spect of the in­ter­est paid be­fore com­ple­tion of con­struc­tion, you will get the de­duc­tion for ag­gre­gate in­ter­est paid dur­ing the con­struc­tion pe­riod in five equal in­stall­ments be­gin­ning from the year in which the con­struc­tion is com­pleted within the over­all limit of ₹ 2 lakh if the prop­erty is self-oc­cu­pied.

In ad­di­tion to the in­ter­est ben­e­fits, you will be able to claim tax ben­e­fit under Section 80 C up to ₹ 1,50,000 along with other qual­i­fy­ing items for re­pay­ment of prin­ci­pal por­tion of the loan from the year in which con­struc­tion of the prop­erty is com­pleted.

I took a home loan of ₹ 28 lakh and it was dis­bursed in De­cem­ber, 2011, at a fixed rate of 10.7% for three years. When would it be bet­ter to shift my loan and to whom?

—Gau­tam Kapoor The cur­rent in­ter­est rate on home loans for cus­tomers with a good track record is 10.15% to 10.25%. It is ad­vis­able to trans­fer your ex­ist­ing loan to any other bank where you will get around 10.15% to 10.25%. Since your loan is under fixed rate of in­ter­est, you will have to con­sider two ma­jor charges while trans­fer­ring the loan. The first one is pre­pay­ment charges, which you will have to pay to your cur­rent lender for clos­ing your loan ac­count.

Ide­ally you should wait till De­cem­ber 2014, when your dual rate loan will get con­verted to float­ing rate of in­ter­est. Once this is done, you won’t have to pay any pre­pay­ment charges to your cur­rent lender for trans­fer­ring your loan to an­other lender.

The sec­ond charge is pro­cess­ing fees which you may have to pay to the new lender where you will trans­fer your loan, which will be in the range of 0 to 0.50% of the loan amount. You must have a good track record of pay­ment of EMIs to be able to get an of­fer from an­other lender.

Harsh Roongta is CEO, Apna Paisa. He can be reached at ceo@ap­na­

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