Everything About Tax & Housing Loans

Most home seekers have to borrow money from banks against some form of collateral in order to purchase their dream houses or apartments. Housing loans are offered by almost every bank and you can borrow money based on the facilities being offered. These loans do not take much time to be approved. The processes are further expedited if the property you are thinking of buying is approved for financing.

Home loans are granted for both salaried and self-employed individuals. Individuals above the age of 24 years and below 60 years working in reputed companies can take home loans based on their salary slip and income of the year. Professionals such as lawyers, doctors, cost and chartered accountants along with self-employed individuals can take housing loans till they are 65 years old. Property in India can be bought with home loans which come with fixed and floating interest rate. The usual term for a housing loan is between 20 and 30 years, although you can reduce the term of repayment.

CIBIL Score: Most home seekers plan for a year or so before applying for home loans because if you do not receive loan approval, you may not be allowed to apply within the coming six months. To ensure that you get approved the first time, make sure you have a perfect CIBIL score. Credit Information Bureau Limited makes note of the number of covered and uncovered loans that are outstanding in a person’s account, his/her spending and banking habits. A CIBIL score of 75 or more is considered to be excellent and banks grant such applicants loans in a heartbeat. To keep your CIBIL score above the threshold, make sure you pay your credit card bills on time and reduce the number of uncovered loans outstanding in your name (personal loan or credit card bills) to the minimum. You should check your CIBIL score every 2 to 3 months to detect discrepancies with the records you maintain.

If the property you want to buy, your papers and CIBIL score is in order, then getting a housing loan is only a matter of time.

The interest paid to service housing loan can be deducted under the Section 24 (b) of the Income Tax Act. As a matter of fact, you can get the prepayment charges deducted too, if the bank or financing institution levied it. The amount paid as repayment of principal on housing loan is deductible under Section 80C of the Income Tax Act. However, this deduction is considered to be a part of your savings and will be a part of your savings in NSC, LIC, PPF and other instruments. Moreover, the deduction is possible only when the construction of property in India has been completed and a certificate of completion has been issued by the builder.

During the festive season, a lot of builders offer to pay the EMI on your home loan till you take possession of the property. These properties are usually pre-approved for loans and you can opt for them if you know your salary or income would increase within the couple of years of construction.