Tax benefits on home loan

Posted on February 22, 2016 by Anukampa

Few years back, people with moderate income, either inherited a home which was built by their predecessors or if they planned to build a house it was only when they got their annuity amount or got substantial money as an inheritance. The tax incidence on construction of a house was too high and there were not enough tax benefits attached to the same. Middle class people only day-dreamt about owning a proper house, it was the prerogative of rich or well off people to get a house constructed for themselves and their family.

The scenario changed with the liberalisation of Indian economy and housing was shortlisted as one of the thrust sector for revival of economy and accordingly required measures were taken to push up the things for housing sector. Apart from easing of home-loan process and interest rates, one of the push-ups to the housing sector given by Government was benefits in regard to Income-Tax. Here we shall give a short synopsis of few deductions to be claimed in regard to home loan:

Paid Interest will be treated as loss: The interest component of the EMI’s paid for the home loan will be treated as loss to the assessed and accordingly will be deducted from his income. This deduction will be effected from the year in which the construction of the home is complete. A maximum deduction of Rs. 2 Lakh can be claimed in regard to home loan for the home used as own residence and if the property is rented then entire interest amount for the year shall be deducted.

Is deduction available on principal repayment? : The repayment of principal amount of home loan also falls under the purview of deduction factor. The part of EMI which is repaid as Principal amount is eligible for deduction u/s. 80C of Income tax. However, a maximum amount of Rs. 1.5 Lakh will be eligible for deduction.

Even Stamp duty paid and registration charges will be eligible for deduction: Section 80C also allows the amount paid towards Stamp duty and registration charges as deduction for the year the payments were made.

Pre-construction interest is also eligible for deduction: Along with, the deduction of Interest paid with EMI’s starts with the financial year the construction is over, the deduction for pre-construction interest can be claimed from the same year. However, it shall not be more than Rs. 2 lakhs for the house used as residence, divided in five equal instalments.

Why switch Home loans with another lender?

Posted on February 12, 2016 by Anukampa

‘Home Sweet Home’ is what every one wishes to own one during life span. Owning a house can be a tedious and a life time achievement for some but it may be a regular buy for others.

Presently, it has become easier for aspirants to own a house, thanks to easy loan facility availability and easy repayment options coupled with rock-bottom interest rates. Interest rate has become the bone of contention amongst housing loan companies and banks. With stiff competitions in the offing, the beneficiary is the loan seeker who is being wooed by financial institutions with cropped interest rates, zero or very nominal processing fees or longer tenure for repayment with attractive EMIs. To expand their customer base, these institutions have resorted to customer snatching practices with offering lower interest rates and a plethora of other services. There can be many pros and cons of switching Home loans with another lender; here we shall give a level platform for both aspects:

Does loyalty pay:

Yes, it pays because the shifting client saves time and money on credit checks, authentications, revaluations, paper work and lot of other formalities besides initiating everything afresh. No, because one might miss a very attractive offer which is in the offing. It will be better to first have a tough negotiation with existing loan-giver before shifting to another one if the deal happens to be that attractive.

Time factor:

Tenure of loan is an important factor while deciding loan shift. If the existing loan is to expire in a short period, then it will not be feasible to shift as like interest time also plays an important role in cost effectiveness. Yes, it will be favourable for an aspirant who has recently started paying EMIs as switching loans to a better package will be very cost effective.

Switching costs:

Home loans when switched might become costly in comparison to the present depending on offered package. The factors of Stamp duty, processing fees, legal costs and expenses of fresh documentations should be in for consideration. Another factor up for consideration is pre-payment penalty charged by present lender. If these factors are favourable then it will be a wise decision to shift loans to another lender subject to other conditions being favourable too.

Keep an eye on CIBIL ratings:

A person who has presently taken a loan from some banking or financial institution should always keep a sharp eye on his CIBIL ratings. Generally, the worth for CIBIL ratings gains importance only when a fresh loan or loan switch is contemplated. Don’t be under an impression that CIBIL ratings will not alter once approval to loan is given and further when payment is smooth. There may be many other factors which might alter ratings. The potential lender will certainly consider CIBIL ratings while considering a switch over borrower.

Decision is yours:

A borrower of home loans is a wise person in his own esteem. He knows the benefits and inadequacies of whether to continue with present loan or switch loan to a new lender. Continuing with present lender has the benefit of acquaintance which might be of help even if there is a negative twist to CIBIL scores because, here, personal touch gets a priority over data facts. On the other hand one may rue over loss of a jackpot opportunity if the shift of loan is not affected.

Real Estate Terminology 5

Posted on January 3, 2016 by Anukampa

We have been talking about Property Terms, giving you insight on the terminology that sometimes get difficult to comprehend. Read on further to know more such terms.

Facilities management

The co-ordination of many specialist disciplines to create the optimum working environment for staff.

Fail rent

The rent determined by a rent officer (or, on appeal, by a rent assessment committee) under a regulated tenancy and registered.

FERA

An act to regulate certain payments dealing in foreign exchange, securities, the import & export of currency and acquisition of immovable property by foreigners. Under Section 31 (1) of the Foreign Exchange Regulation Act (FERA) of 1973, it is mandatory for foreign corporations, which are not incorporated in India to obtain permission from the Reserve Bank Of India (RBI) to acquire, hold, transfer or dispose off in any manner (expect by way of lease for a period not exceeding five years) any immovable property in India.

Fire certificate

A certificate covering matters of safety required under the legislation for hotels, boarding houses, factories, offices shops and railway premises, excluding those buildings containing less than a minimum number of employees.

Fitouts

Relate to the interior permanent furnishings required in a property including HVAC ducting, fire protection system implementation, establishment of workstations and telephone/computer cabling among others, in order to make the property fit for usage.

Flatted factory

An industrial building of more than one storey, usually with two or more goods lifts, and constructed or converted for multiple occupation. The building is subdivided into small, separately occupied units which are used for manufacturing, assembly and associated storage.

Freehold

Freehold property can be defined as any estate which is “free from hold” of any entity besides the owner.

Frontage(line)

The full length of a plot of land or a building measured alongside the road on to which the plot or building fronts. In the case of contiguous buildings, individual frontages are usually measured to the middle of any parting wall.

Come back to continue reading about more Real Estate terms

Own a home!

Posted on December 6, 2015 by Anukampa

Getting a home or buying a home of your own is one of the most important aspects of life. It not only defines your well-being but also gives you security for life!

Having a place of one’s own is important in terms of security and investment for the future. With changing times and economy, it has not only become easy to buy a home but also the age at which you purchase your first home has decreased.

Here are some of the benefits of having your own home.

1. At the most basic level, having your own home gives you a sense of security and ownership. Not only do you have a place to reside but you also own it and would own it for the rest of your life. Isn’t that a great feeling?

2. Property rates would only increase with time. We have seen a surge in the property rates in the last two decades and it is only going to move upwards. With the lands getting scarce and the demands increasing, we only know what happens to its prices.

3. With changing times, we have also seen an upward trend in the salaries, so affordability is not an issue combined with the fact that home loans are no longer a terrifying aspect.

4. Staying on rent cannot be a permanent option. In fact, the amount that you shell out every month on your rent can be your EMI towards your home loan repayment, which in the end, will help you own a house and not leave you homeless. Also the interest on home loans are lower than any other loan, so it’s better to take a loan and buy property.

5. Advantage of tax breaks. Under the present tax rules, you can get a tax break on interest repayments for home loans to the extent of Rs 150,000 and on principal payments up to Rs 100,000 per annum.

6. Property works as a good investment and an asset. We have always seen homes becoming a rewarding investment and property rates are only likely to rise with urbanisation and economic development.

These reasons not only sum up the need of a home but also make it look beneficial for the future.

Know the terms about your property-Part 2

Posted on September 27, 2015 by Anukampa

In continuation with the previous blog on real estate terminology, this blog briefs you on the terms that will help you understand things better.

Encumbrance Certificate: A report issued by Registrar of Assurances or Sub-Registrar’s office after due verification of the relevant documents certifying that the property in question is free from all encumbrances such as mortgages, leases, easements or restrictions.

Efficiency ratio: Efficiency ratio is expressed as a share of carpet to super areas of the property.

Floor Space Index (FSI): Floor Space Index is the quotient of the ratio of the combined gross floor area of all floors excepting areas specifically exempted under these regulations to the total area of the plot.

Maintenance charges: These are charges taken by the maintenance society towards the maintenance of the property which includes costs of generator sets, security, landscaping, and common areas.

Market value: Valuation process evaluates the market value of the property. Demand and supply forces in the market and factors like type of property, quality and construction, its location, infrastructure and available maintenance are taken into consideration. Market value of the property is the price that the property commands in the open market.

Occupancy Certificate or OC: A certificate issued by the local development authority certifying that all necessary works have been completed as per the sanctioned plans and that the property is fit for occupation. The OC is issued after clearance from the water, electricity, sewerage, fire fighting authorities etc.

Registration charges: The fees associated with getting the legal title registered in your name. This legal process takes place in the sub-registrar’s office in your local court.

Super area: This is as a rule regards to the entire area of the building which includes carpet area, lobbies and corridors, walls, lifts, staircases, basements, and other atrium and utility areas.

Stamp duty: Real Estate Stamp duty is a type of tax accumulation by the Government of India. Stamp duty is established on the agreement value or on the market value whichever is greater.

Sale deed: Sale deed provides the buyer the absolute and undisputed ownership of the property. With this law, the seller transfers his right of property to the buyer. Subsequently, it is executed to the execution of the sale agreement and after compliance of various terms and conditions detailed in the agreement.

Title: The document that provides legal evidence that the person has the right to the possession of the land.

Know the terms about your property!

Posted on September 13, 2015 by Anukampa

It is really important to understand the real estate terminology as it helps an individual to know more about the properties. If you want to understand real estate development, you need to know the key terms used to describe properties whether you’re developing the properties from the ground up or acquiring and renovating them.

Real Estate Broker –A real estate broker or real estate agent is a person who acts as an intermediary between sellers and buyers of real estate/real property and attempts to find sellers who wish to sell and buyers who wish to buy.

Common Area Maintenance (CAM) – This is the amount of additional rent charged to the tenant to maintain the common areas of the property shared by tenants. Typical examples include such work as landscaping, snow removal, exterior lighting, as well as insurance and property tax.
Usable Square Footage –USF is how much actual space you will be able to use. Rentable square feet is how much space you’re paying for, including shared common areas. The measurement called a load factor is the difference between RSF and USF, expressed as a percentage of USF
Escalation Clause – A clause in a lease which allows the landlord to increase the rent in the future to reflect changes in expenses paid by the landlord, such as real estate taxes, operating costs, etc. This can take three forms: 1) fixed periodic increases, 2) adjustments based on the Consumer Price Index (cost-of-living increases), and/or 3) an increase tied to the increased costs of operating the property.
Tenant Improvements –The real estate definition of Leasehold improvements, also known as tenant improvements (TI), are the customized alterations a building owner makes to rental space as part of a lease agreement, in order to configure the space for the needs of that particular tenant.
Full Service Rent – This refers to an “all-inclusive” rent that includes operating expenses and real estate taxes for the first year. The tenant is generally still responsible for any increase in operating expenses over the base year amount.

Why invest in Real Estate?

Posted on August 3, 2015 by Anukampa

Real estate investment is simply the purchase of a future income stream from property. Here are some of the key reasons to invest in real estate.

Attractive and Stable Income Return- A key feature of real estate investment is the significant proportion of total return, accruing from rental income over the long term. This helps reduce volatility, as investments that rely more on income return, tend to be less volatile than those that rely more on capital value return. Real estate is also attractive when compared with more traditional sources of income return.

Gain more leverage- Real estate is one of the few investment vehicles where using the bank’s money couldn’t be easier. The ability to make a down payment, leverage your capital, and thus increase your overall return on investment is incredible.

You can pass it onto your kids- When thinking long-term for your investment, you don’t just have to think your lifetime – you can also think about your children. These investments can be passed onto your children either before or after you pass away.

It’s an asset you can use- Investment or not, your property is still just that – a property. So, should events take a turn which means you have to move into that property, you can (pending rental agreements, of course) whether for the short term or the long term – and, if things change again, you can move back out, leaving your investment intact.

Increased tax deduction strategies- Rental property affords investors with another incredible opportunity to convert personal expenses to potentially valid business deductions. Don’t forget that rental real estate is a business. This means that travel expenses to check on your properties and payments to family members who manage your properties (such as students away at college) can be deductible and increase the tax benefits when it comes to cash flow and the future sale of the property.

The tax write-offs against your other income- Depending on your classification as an Active Investor or Real Estate Professional and your income level, there is a good chance your rental property will not only give you tax-free cash flow, but an overage of tax deductions you can use against your other income. With that said, this is something you want to discuss with your tax professional before investing so your expectations are realistic.

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