News: Home loan tax incentives you need to be aware of-05-03-2021

https://www.financialexpress.com/money/home-loan-tax-incentives-you-need-to-be-aware-of/2207072/

Reduction in the recent home loan interest rates will benefit new borrowers as the rate cuts will only be applicable for them and not to the existing borrowers.

If you have been planning to take a home loan, now might be the best time for you to do so. In the last few days, various banks have reduced their home loan interest rates for borrowers.

HDFC, for instance, has reduced its Retail Prime Lending Rate (RPLR) on housing loans by 5 basis points, effective from 4 March 2021. Similarly, the State Bank of India (SBI), ICICI Bank and Kotak Mahindra Bank have also reduced the interest rates on home loans. Most of these banks have slashed their home loan interest rates to 6.70 per cent per annum. However, for most of these banks, it is a limited period offer, up to March 31st, 2021.

Experts say this will benefit new borrowers as the rate cuts will only be applicable for them and not to the existing borrowers. If the RBI brings a cut in the repo rate, the existing borrowers can benefit, as the repo rate linked to home loan is calculated on the repo rate, plus the spread or margin of the bank.

Here are some home loan incentives that you should be aware of:

• If a house is bought jointly, for instance with your spouse, both of you will enjoy deduction. A tax deduction of up to Rs 2 lakh can be claimed by both owners.
• A certificate from the lender, be it for a loan taken from a friend, private lender or an employer, is eligible for a tax deduction. Note that only the interest amount will be eligible for the deduction, and not the principal amount.
• As a borrower, you can claim the total interest paid during the pre-delivery period (of an apartment that is under construction) as a deduction. It can be done in 5 equal instalments starting from the date of possession of the apartment. Note that the maximum a borrower can claim is Rs 2 lakh, in the case of self-occupied property as a deduction per year, and an additional interest deduction of Rs 1.5 lakh in the case of the first house.
• For a second self-occupied house property, no notional rent will be added to the taxable income. However, this is only available for up to 2 houses, in the case of a third house that is not let out, it will attract tax which will be calculated at expected market rent.
• Total loss from house property that can be adjusted with any other income be it salary or income from other source is capped at Rs 2 lakh.