Tax benefits on the home loan you are unaware off:

The Income tax department provides tax benefits to the home loan borrowers in order to provide relief to the loan applicants from the additional burden which they have to bear for payment of monthly installments. The benefit for the loan applicant is that the buyer can purchase their dream home in an early stage by applying for the loans. The earlier the buyer opts for a loan, higher is the moratorium has been provided to the loan applicant to repay the monthly installments. The exemption for the income tax is liable under income tax act 80C.

There are some capping been put in the order to put some restrictions on the borrower to take benefit of the tax exemption. The borrower can avail the maximum benefit of upto Rs.2 lakhs per annum beyond which exemption cannot be granted to the loan applicant. The borrower needs to repay the installments on time and requires to submit all payment related proofs on time so as to avail of tax benefits.

Following are the benefits to the borrower related to the tax exemptions:

· You can claim tax benefits even if you missed the Emi:

Unlike the deduction on property tax or principal re-payment of home loans, which are available on a paid basis, the deduction on the interest is available on accrual an basis. Even if the borrower has missed some of the EMI in few months then also the applicant can expect exemption under the income tax act 80C. However all the documents showing the deduction can be substantiated if questioned by the authorities.

· Processing fees is tax deductible:

The processing fees of around Rs.5,000 or Rs.10,000 is being charged to the applicant in order to process the loan of the applicant. The charge is one time being taken by the lender from the borrower so as process the loan of the applicant. The same amount is also liable to be taken into consideration for the tax exemption to be opted by the borrower.

· Principal repayment of tax if you pay before 5 years:

If in case if the borrower sells the property before the period of 5 years from the date of the purchase of the property then the tax exemption is reversed back by the income tax department under income tax act 80C. As per the rules under the income 80C in respect to the principal repayment of housing would get reversed to the added to your annual taxable income in the year in which the property is sold and you will be taxed at the current rate. The amortization tables are such that the repayment schedule is interest heavy and tax reversal rule under income tax act 80C.

· Loans from relatives and flats is eligible for tax deductions:

Under section 24 of the income tax act deduction is applicable for the loans being provided by anyone for the purchase of loan or construction of the property. The applicant can also claim the tax benefit for the purpose of reconstruction or repair of the property. The loan does not

necessarily be taken from the bank. For tax purpose the loan is not relevant the usage is. The taxpayer should be able to satisfy the assessing the officer how the loan needs to be utilized for construction or purchase of the house property completion or construction within 5 years and other conditions are met. The lender should pay the income tax return paying the income tax on it. The interest charged should be reasonable and a legal certificate of interest should be provided by the lender along with the name, address and PAN. Tax benefits are not applicable on principal repayment if the borrower does not apply for the loan from the bank or a financial institution registered with the reserve bank of India. Also the additional benefit of Rs.50,000 under section 80EE is not available.

· The borrower may not be eligible for tax benefit if he/she is just a co-owner:

You cannot claim tax benefits if you may be the one who is paying the EMI. For example if the borrower pays the installment for the property owned by the parents and pays the EMI on behalf of the parents then the tax benefit cannot be claimed unless the person is a co-applicant in the property. The applicant needs to be both the owner as well the borrower to claim the tax benefit. If either of the titles missing then the borrower is not applicable for the tax benefit.

· You can claim the pre-construction period upto 5 years:

The borrower can start claiming the construction benefits once the borrower receives possession. You cannot claim principal repayment but the interest paid during the period can be claimed and post-accrued. The law provides a deferred deduction on the interest payable during the period that can be accrued or post claimed post possession. The deduction on such interest is available equally over a period of 5 years starting from the year of possession.

Conclusion:

Thus we can conclude that the borrower can claim tax benefit under the income tax act 80C so as to get the reduced burden on the tax payment as the borrowers are already burdened with the liability to pay the installments. The borrower if opts for the tax benefit for the property purchased then it is mandatory to be retained for at least the duration of 5 years otherwise in another case the property owners tax benefits can be fortified in the subsequent payment of income tax returns.