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I bought a property for ₹ 45 lakh and wish to sell it for ₹ 60 lakh. I want to sell the property af­ter pre­pay­ing the loan taken against it. Is it pos­si­ble to save the pre-pay­ment charge? Also, I will be earn­ing ₹ 15 lakh on the sale of the said property. Do I need to pay tax on it or is it tax ex­empt?

- Sur­jit Shah No pre-pay­ment charges are payable if the loan taken for the said property is on a float­ing rate of in­ter­est. If the loan is from a hous­ing fi­nance com­pany, no pre-pay­ment charges are payable in your case even if it is on a fixed rate of in­ter­est as you will be re­pay­ing it from your own sources. The gain of ₹ 15 lakh will be tax­able de­pend­ing on the pe­riod for which you have held the property. In case you are sell­ing the property within 36 months from its pur­chase date, the profit will be taxed at nor­mal rates. How­ever, if I am plan­ning to take a hous­ing loan. I was told to opt for lower EMIs and pre-pay at least once a year to re­duce the loan amount (as the pre­pay­ment is to­wards prin­ci­pal). Is this cor­rect?

- Manju Me­hta Yes, the amount you pre-pay is ad­justed against your prin­ci­pal out­stand­ing. So each pre­pay­ment will re­duce your loan ten­ure by de­fault. How­ever, if you want to re­tain your loan ten­ure and re­duce the EMI, you need to dis­cuss with your Please tell me how to de­ter­mine no­tional value of a sec­ond house property for in­come tax pur­pose?

– Latika Sharma The no­tional rent is the value at which the property in ques­tion is rea­son­ably ex­pected to be let out. You should check out the rates at which sim­i­lar prop­er­ties in the area are be­ing leased out and use that as the ba­sis for de­ter­min­ing the no­tional rent value. I have taken a home loan from a hous­ing fi­nance com­pany. I want to trans­fer it to a na­tion­alised bank. At the time of sign­ing the agree- ment, there was a clause for pre­pay­ment charges in case the loan amount was pre-paid. Now as per the cir­cu­lar of RBI no pre-pay­ment charges can be levied in case the loan is closed be­fore the pe­riod for which it is taken. Will pre-pay­ment charges be waived of in this case? What hap­pens in case the fi­nan­cial institution does not fol­low the RBI guide­lines?

– Sar­nam Sa­manta The fi­nan­cial institution in your case is gov­erned by Na­tional Hous­ing Bank (that reg­u­lates hous­ing fi­nance com­pa­nies and not by RBI). NHB has is­sued a cir­cu­lar ban­ning levy of pre-pay­ment charges on float­ing rate loans ir­re­spec­tive of the source of pre-pay­ment. This in­cludes even the bal­ance trans­ferred to an­other lender. This is ap­pli­ca­ble to all loans, new as well as ex­ist­ing loans from hous­ing fi­nance com­pa­nies. So, even if the clause in your agree­ment men­tions the fore­clo­sure penalty, it will not ap­ply to you. The fi­nan­cial institution can levy a pre­pay­ment charge on the out­stand­ing loan amount that you want to trans­fer to any other lender and that too if it on a fixed rate of in­ter­est.

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