Home loan prepayments: Some important points
Buyinga home is one of the major decisions of one’s life and almost everybody who takes a home loan has to go to a bank or financialinstitution to get his home financed. The money involved in a homeloan is often a very big sum. Government of India has given some taxbenefits on to decrease the burden of buying ahome in India. Here are 5 important facts about these tax benefits.
Bothinterest and principal components of home loan attract tax benefits.Persons who have taken a loan to buy a home or for construction canclaim these deductions under the section 24(b) of the Income TaxAct.
Thededuction on interest component on home loan is available up to Rs.1.5 lakhs if the loan was taken on or after April 1, 1999 to buy orbuild a property. The purchase or construction should be completedwithin three years from the end of the financial year in which theloan was taken. In addition to it a certification from the lendingbanks is needed to certify that interest is payable against the loanadvanced to buy or construct a house.
Thesedeductions are only available if you continue to make payments. If aborrower fails to make EMI payments on time, he cannot claim taxbenefits on the amount supposed to have been paid.
Ifa person buys a house and sells it within the same year or beforethree years, he is liable to pay short term capital gains tax. But,if the sale had taken place after three years, he is liable to paylong term capital gains tax. Long-term capital gains are exempt fromtax if the profit amounts are invested in capital gains tax-savingbonds as detailed under Section 54.
Onlya person who has taken a home loan can claim tax deductions. Ifthere are co-borrowers of the home loan, the deduction they canclaim is limited to the extent to the part of the loan they repay.
