You've invested in a home, but it is still under construction. In the meanwhile, you are staying in a rented flat.
Can you get tax benefits on both your housing loan and on your HRA?
Housing loan expert Harsh Roongta answered this and other housing loan related questions in a chat with Get Ahead readers on Wednesday, January 3.
For those of you who missed the chat, here is the transcript.
Part I: Fixed or floating home loan?
Part II: Has your fixed home loan rate been increased?
as asked, Hello sir , i am going to buy a flat under construction for 35 lakhs , if i apply for loan on feb 07 (Tenure 20 years) and assuming that i will get the possesion of flat by feb -08 can i claim tax benfit for the pre emi payment made during the period of feb-07 to feb-08 .my sal is around 7.8 lakhs per annum
Harsh Roongta answers, For the year ended on March 31, 2007, no benefits of any kind are available. For the year ended March 31, 2008 -- assuming the flat construction is complete by that time -- you will get a deduction of the entire interest from April 1, 2007, to March 31, 2008, plus 1/5th of the interest payable uptil March 31, 2007. This is subject to a limit of Rs 1,50,000 if the property is self-occupied. Deduction for the principal portion paid will be available only for the year ended March 31, 2008, onwards.
Debasish asked, Hi harsh, can I claim HRA and get tax benefit on Home loan full EMI parallelly as my flat is still under construction and am staying in rent?I am paying full EMI to bank.
Harsh Roongta answers, Contrary to popular opinion, there is no restriction under the IT Act to get both. Many salaried consumers take a home loan to acquire a residential property, but do not stay in that property for various reasons. They stay in rented premises for which they pay rent. If they are receiving a house rent allowance from their employer, a question that frequently arises is whether they can claim exemption of their HRA based on the rent actually paid by them as well as the interest payable on the loan taken to acquire the owned property. This is such a widespread question that it rightly justifies an elaborate reply of this kind justifying that both deductions are available.
Anuradha asked, what do yuo mean by "transparent floating rate"? which bank have this tranparency?
Harsh Roongta answers, Unfortunately, very few banks do so. On request, some banks will link the home loan interst rates to their fixed deposit rates. The PSU banks are slighly better as they at least link their rates to their PLRs, which affect all borrowers and not just home loan borrowers.
vg1802 asked, which loan is preferd ..fixed or floating
Harsh Roongta answers, This is one question that bothers all buyers. Fixed gives a sense of security, while you wonder am I paying too much all the time. Our recommendation on this million dollar question is given below.
Firstly, this is not a one time decision and needs to be reviewed periodically.
Secondly, understand what exactly 'Fixed rate' and 'Floating rate' mean before you take a decision.
Fixed Interest Rate loans: These loans are normally priced higher than a variable rate loan for a similar tenure. That is, in the present market scenario while you would be able to get a floating rate loan for 20 years at 9.5 per cent interest rate, the fixed rate would be somewhere around 10.5 to 11 per cent.
The other option is variable/ floating rate loans. This kind of loan is also called 'adjustable rate' home loans. Here, the interest rate is linked to a benchmark rate. Some banks use their 'prime lending rate' (PLR) as the benchmark rate. Some banks have a specific benchmark rate that they use for home loan purposes. Typically, the interest rate applicable to your loan tends to be a certain percentage below this benchmark rate. Ideally, the benchmark rate should vary exactly as per the market conditions (though it rarely does -- it is quick to go up but rarely shows the same alacrity while going down).
Apnaloan.com's recommendation is to go in for a transparent floating rate in today's context (this answer is given in January 2007).
RAKESH asked, Sir, I have bought a plot in Bangalore for which I am availing loan from UTI Bank @ 9.50 % Floating rate.The total loan amount works out to Rs 10 lac.The plot is BMRDA approved and is of dimension 1500 sq ft.UTI Bank is telling me that they will charge 0.50 % of the loan amount towards stam duty charges as decided by Karnataka Govt.When I checked up with ICICI Bank they did not make any mention of the same.Could you please clarify
Harsh Roongta answers, Different banks have different stances relating to stamp duty payable on a loan taken against the mortgage of the property. Some banks pay this upfront. Others have a clause in their agreement which states that it will have to be paid by the consumer if demanded by the government in the future, with any interest and penalty on this stamp duty.
shailmala asked, Can you say if it would be better to go for loan with public sector banks or with the private banks. Although public sector banks are a bit traditional in their approach with less willingness to provide customer support but they do not cheat. Whereas private sector banks have their hidden agenda to make more n more profit which is against the goodwill of loan seekers. Please advise me on my view.
Harsh Roongta answers, A very famous Chinese proverb says that the colour of the cat does not matter as long as it catches mice. So, if the PSU bank gives you a good deal, you should go ahead. The same applies for a private sector bank.
keerti asked, hi harsh , i want to buy a home in budget of 20lacs, the combined income of my husband and me is about 5 lacs how much loan we can get and what about the emi and which one is siutable fixed rate or floating rate.
Harsh Roongta answers, See the advanced loan eligibility calculator on the following link: http://www.apnaloan.com/index.php?option=com_calculators&task=advancedhomeloan. Your eligibility for a 20 year loan @ 9.5% should be between Rs 16-22 lacs. You should go for a transparent floating rate.
lokeshjoshi asked, Sir, pls tell me the meaning of these terms :basis points, deliquency and bucket
Harsh Roongta answers, One basis point means 0.01%. So 100 basis points shall mean 1%. Any account that does not pay on time is termed as a delinquent account. Depending on how many days it has been delinquent, it may fall into the 30 day bucket (delinquent for 30 days) or 60 days bucket (delinquent for 60 days) and so on.
Part I: Fixed or floating home loan?
Part II: Has your fixed home loan rate been increased?
Part IV: Don't have enough money for downpayment?
Part V: Struggling with two EMI payments?
Harsh Roongta is the CEO of apnaloan.com, a site that help people get the most competitive loans. He is also the co-author of a popular guide to home loans, Complete Home Loan Guide.
