Home loans: Is your builder misleading you?

Have a query regarding your home loan? Maybe we can help.

Drop us a line and our expert, Harsh Roongta, will answer it. Please write to us at getahead@rediff.co.in with the subject line as: Question for Harsh Roongta.

I've purchased a house and already claiming the housing loan interest exemption up to 1.5 lakh and I stay in this house. If I purchase another house with the intention of giving it out for rent, what are the options I can have?

1. Is it allowed for claiming interest on both houses?
2. If it is not allowed to claim interest on both the houses, can I claim a higher interest amount, which is more than 1.5 lakh on the house, which I would be giving it out on rent? What is the limit here?
3. Will the rent I get be taxed?

Harsh: It is a common misconception that you can get deduction on only one house. In fact on the second house that you give on rent, the entire interest payable will be deductible irrespective of its quantum. Yes the rent you receive as income from house property is taxable. However, you can claim the deductions for interest payable as well as a 30 per cent standard deduction. For a more detailed answer please visit this link read Home loan deductions: Some myth busters.

Took personal loan on my credit card from CITIBANK where I had my previous salary account. Currently my salary account is Deutsche Bank (from past 3.6yrs). The personal loan ECS in CITIBANK bounced back because of insufficient funds.  As per discussion with CITIBANK, every month the CITIBANK executive has to collect the money and was giving me the acknowledgment receipt.

Now I applied the Home Loan @ Deutsche Bank (Current Salary Acct).  As per Deutsche Bank, the CIBIL report saying that my personal loan ECS with CITIBANK bounced (total 18 ECS transactions were bounced). But every month I was paying regularly the loan amount to the CITIBANK executive. Chances of getting home loan through Deutsche bank look low. As I stated already I am paying the loan amount regularly.

Can you please help me how can I convince the Deutsche Bank people in getting the home loan?

Harsh: Clearly there have been regular delays in payment of the loan to Citibank. This fact will make it difficult for you to get a loan from any bank. However if the delays have been minor then you can perhaps try and explain that the delays were administrative in nature. However even for that you should have paid the delayed payment charges, dishonour charges and penal interest, if any. I am afraid otherwise the chances of getting a loan look rather low.

Can the pre-EMI paid be claimed in any future year after the date of occupancy? My pre-EMI for 3 years is approx 2.5 lakh and my interest paid per year after the possession is approx. 1.8 lakh per year, of which I can claim only 1.5 lakh as per the limit of tax benefit. If I claim my pre-EMI currently will I get the benefit? Does the limit of 1.5 lakh include the pre-EMI amount also? Can I claim my pre-EMI in the year may be 10th or 15th year when my actual interest paid will be much lesser?

Harsh: Pre-EMI interest paid can be shown in the five equal installments starting from the year of the completion of the construction. If the property is let-out, then you can claim the entire interest payable on the deduction without any restriction. If it is self-occupied then the limit for deduction is Rs.150000. The pre-EMI interest is very much a part of the limit of Rs 150000where the property is self-occupied.

I am having housing loan of 5 lakh taken at HDFC for 15year term in the year 2001 Feb. for an interest rate of 11.5 per cent. Due to the interest rate changes till this year 2009, my house loan closes in 2014, with the current interest rate of 9.75 per cent. Currently I am availing the tax rebate (principal 43703/- & interest 27769/-). I would like to do partial payment of Rs 100000other than the current monthly EMI (5956/-) in order to close my home loan as early as possible.

In this regard can I avail additional tax benefit on the amount paid other than normal EMI? I require to reduce my tax deduction as my taxable income is above 5 lakh (tax above 50K) is it better to do partial payment or increase the EMI? Please advise me?

Harsh: You can get the deduction under Section 80 C up to the overall limit of Rs 1,00,000if you wish to partially pay back your loan. The prepaid amount will also qualify for the deduction under Section 80 C. So if you have not used up the total limit of Rs. 1,00,000 then the benefit will be to the extent of such non-usage.

I had loan from ICICI initially. I sold of the house and repaid the loan. I bought new house and took new loan from IDBI. Can I claim tax benefit on both the loans?

Harsh: There will be two tax implications in your case. Firstly you have sold you old home so you will have to see the tax implications of the same.

If the house has been held for less than 5 years then any deduction claimed for principal repayments under section 80 C will need to be offered for taxation in the year of sale. There is no impact of the sale on the interest claimed as deduction in respect of the sold house.

You can get deduction for the total principal paid on the home loans during the year under Section 80 C up to a maximum of Rs 1,00,000/-. You can also claim deduction for the interest payable on the loan taken to buy the new house.

I am a salaried employee. So is my husband. If we take a joint loan and buy an apartment in which we are co-owners, does it mean that I can avail of tax benefit of 1 lakh principal and 1.5 lakh interest? And my husband too can avail of the same amounts of benefit? So the combined benefit would be 5 lakh...right? Also, if it is a self-occupied house then am I allowed to pay rent for another property in the same city? So can I claim loan tax benefits for a self occupied house and HRA for a rented house too?

Harsh: Yes you are right. If you and your wife are owners or co-owners of the property you can get exemption for the home loan repayments in the ratio of your respective shares in the loan. Tax deduction benefits will be available for each of you separately under section 24 (interest payable on the loan) limited to Rs 1,50,000each if property is self occupied and under section 80 C limit to the fullest extent of Rs 1,00,000each (for the principal repaid) as per the ratio of the loan. You can also claim exemption for HRA for actually paying rent to stay in a rented house not belonging to you. Which city the rented house is in will not make any difference to claim the exemption.

Can I claim tax benefit under 80 C for stamp duty, registration fee and for resale of flat too?

Flat registration fee and stamp duty is eligible for deduction under section 80 C up to an overall limit of Rs1,00,000.

I have booked a flat in Mumbai, costing Rs 1380000. And my loan amount is approximately is Rs 1173000. I have already done the necessary formality with the builder. Now all I need to do is to take loan from bank. My only question is: It's an under construction project it will take around 2 yrs to complete so if I will take loan, from when will my EMI start? Will it start when I will get the keys in my hand or when my loan will get sanctioned?

I have asked the builder regarding this and he said: I need to pay only interest of Rs 200-300 per month until I get the keys and once the bank will pay all the loan amount from then I will start paying my EMI.

Harsh: The builder may be misleading you. On every disbursement made to the builder directly by the bank you will need to pay pre-EMI interest at the rate provided in the agreement. If the disbursements are high, the pre-EMI interest will be quite significant.

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 construction plan. It does not have the principal component.

You have the option to tell the bank to not disburse the entire amount before completion of the project and the bank will accordingly disburse the money partially to the builder as per the terms of the contract between them.

The actual loan repayment will normally start only when the entire loan amount is disbursed to the builder. Please note that the bank does not guarantee the construction of the property in time and it is your liability if the construction is delayed.

I had purchased a flat in 2004 for which the pre-EMI started in 2004 itself and EMI started in 2005. I got the possession for it in Aug 2006. Due to some reasons I could not avail the home loan interest/principal payment benefits for 2006-2007. But after that I have been availing it for the last two years 2007-08 and 2008-09. In the current year, I have closed the home loan and can avail the principal payment benefits for the current year (since interest is minimal).

Now I want to know, can I avail the Interest benefits for the year 2004-05, 2005-06, 2006-07 in the current year (2009-10) plus next four years or it will be valid for 2006-07, 2007-08,2008-09,2009-10 and 2010-11 only? I am confused. Please provide a solution.

Harsh: You can claim a maximum of one-fifth of the aggregate interest payable till the period of 31st March 2006 as the interest of that financial year 2009-10 and 2010-11.

I purchased a built-up house in Nov 2008 thru Bank of India home loan and the registration was done in the same month. Said house is self-occupied from Nov 2008 itself. I was not aware of the tax benefit or stamp duty & registration and filled my ITR (FY 2008-09) without much benefit. Please advice if I can avail this benefit this year? Do I need to submit appeal for the same or there is other procedure for the same.

You can file a revised return even now till 31st March 2011 or till you receive the assessment order for the particular year whichever is earlier. This is the only way you can get the deduction.

I have taken a house loan for which the interest component is coming 250000 I have rented out the house and the rent for the year is 48000. As per section 24 can I claim the loss for the house property as follows? Tax rebate under Section 24 = 48000 minus 250000 + (30 per cent on damage) + property tax. For example this calculation is coming around to 225000, Can I subtract this from the gross income for tax rebate? The house is taken under joint loan with my wife.

Harsh: The calculation for the loss from house property will be done separately for you and your wife.