5 Disadvantages of Home Loan is quite unusual topic for my blog. I personally feel that any financial decision should not be biased and prejudice. We should look at both the aspects before arriving at final decision. Based on rough estimates, 80% residential real estate transactions in India are executed by availing Home Loan. For majority of Indians real estate affordability is major concern. At the same time there is no love lost for Real Estate & Gold. Home Loan is blessing in disguise for this section. Buying a property on Home Loan is a major financial decision and each financial decision comes with own set of advantages and disadvantages.
Based on my experience, i would like to add that this post “5 Disadvantages of Home Loan” is 1st post in India highlighting financial disadvantages of Home loan. I could not find any other post on this subject. Many readers might not agree with certain points but i believe in sharing honest and frank opinion. Let’s check 5 critical disadvantages of Home Loan
Actual Cost of Property
One of my friend purchased a 3 BHK apartment in year 2007 for 50 Lac. In 2012, he sold the same flat for 70 lac. Sounds good & prime facie he made profit of 20 lac on his investment. This is not the case as he paid approx 24 Lac interest on Home Loan of 40 Lacs in 5 years. Now, next question coming to your mind will be that he saved income tax also. We will address this in next point but in real sense the actual cost of property is 74 Lacs i.e. 50 lac (Cost) + 24 Lac interest. Not withstanding this, his principal liability at the time of sale was approx 20 Lacs. Reason for very high interest rate payout initially is that principal component paid during initial loan years is minuscule compared to interest in total EMI. Higher interest component offset the property appreciation to large extent.
Loss of HRA Component
One of the major disadvantages of Home Loan is loss of HRA component, if property is self occupied. It is mainly applicable for people with high salary. In lieu of HRA, you can claim maximum deduction of 1.5 lacs on Interest component. Doing reverse calculation, it comes out to be monthly deduction/income tax saving of Rs 12500 in interest component. Assuming, you are staying in Non-Metro city & getting 40% of Basic Salary as HRA. If your basic salary per month is less than or equal Rs 31250 than you will either gaining or at no profit no loss by availing home loan in terms of Income Tax Saving. In case your basic salary is more than Rs 31250 than you will be definitely at loss as your HRA benefit would have been higher compared to gain from deduction on Home Loan Interest paid. Besides deduction on interest, not too many people get benefited from deduction under section 80 C on principal repayment as 80 C limit of 1 Lac is too less to accommodate EPF, insurance, school fees, Principal Repayment of Home Loan etc.
Home Loan is Long Term Commitment
Though average duration of home loan is 8 years but it is just an average. Median is normally 10-12 years. If you have any major financial goal lined up in next 10 years like kids education or marriage than Home loan is a major hurdle to fulfill the same. Home Loan put major burden on finances atleast for initial 4-5 years and then it takes another 3-5 years to recover from same. You must be wondering, salary will also increase but we need to account inflation also which is devaluing the salary hike. Last year suppose i got hike of 7% in salary but with average inflation of 10%, in real terms my salary reduced by 3%. This point remain remain one of key disadvantages of home loan until unless there is sharp jump in income levels.
Volatile Interest Rate Movement
Daily i get 4-5 cases where people are serving EMI from last 2 years but principal outstanding is still same as it was at the time of availing loan. Reason, when interest rate increases banks increase the loan tenure rather increasing EMI thus your interest component increases in EMI. In few cases, principal outstanding is more than original amount even after 2 years. Uncertainty in Interest rate movement is one of key disadvantages of Home Loan. You may opt for Fixed Rate Home Loan but it also not fixed in true sense. You may read my post Floating vs Fixed Interest Rate Home Loan
Opportunity Lost
The biggest flaw in our calculations & one of critical disadvantages of home loan is that we don’t consider opportunity lost. If i am paying 2 Lac as principal component during a year then my opportunity lost is returns which i would have received, if i would have invested same money in some other financial instrument say Bank FD. Assuming 9% interest rate, my opportunity lost for the year is Rs 18000 & it should be reduced from home loan benefits.
I tried to list major disadvantages of home loan from financial perspective and each of these points should not be considered in isolation. You should list down all the benefits along with financial disadvantages of home loan to arrive at final decision. The biggest savings is on monthly rental if property is self occupied but does it offset the loss of HRA component, i cannot answer as it depends on multiple factors. It is important to take 360 degree approach. If you feel, i missed any important point i.e. key disadvantages of home loan then feel free to post in comments section.
Copyright © 2011-2013 Nitin Bhatia. All Rights Reserved.
Absolutely right!!! If the appreciation is not that much, then we will be at loss…
only thing we may deduct the rental amount that we supposed to pay during the period we hold the house…
Hi Sir, Can you clarify me about HRA benefits,
1. I’m living in rented house in Metro City & my parents also living in rented house in Non Metro City , in this case shall i claim HRA for my parents also?
2. I checked with my company payroll help-desk , they saying you will be unable to claim HRA for the two house rent for same period. Is it correct?
1. You cannot claim HRA for the rent paid by your parents
2. Thats correct
Hi Sir,
I & my wife have got a loan of 26 lakhs from LICHFL for construction of a house on a plot owned by us. Due to cost escalation I am planning to get an additional loan of 5 lakh. However LICHFL agent says that it will be considered as a new loan account and eligible for tax benefits. Could you please clarify if I can get tax benefits for 2 loan accounts on the same property.
You cannot avail 2 loans on 1 property. LICHFL must be referring to top up loan or extension loan
I am going to book a flat in west Bengal Howrah, will I get any paper/invoice from the promoter for the booking amount.
Also what are the papers that I should check before booking the flat.
You will sign agreement with builder and receive payment receipt for booking amount. If you are opting for construction linked plan then you will receive disbursement / demand request from builder as and when particular stage of construction is completed.
For list of documents, pls check following link
https://www.nitinbhatia.in/real-estate/list-of-documents-required-for-property-purchase-or-home-loan/
Hello Sir,
I’m Living Bangalore in an rented house near to my office and I own the property house in bangalore bit far away from my office and my parents are staying in that house. now m paying house rent 15k and housing loan 40k. can i declare both the amount is there any tax benifit
You can claim both HRA and Loss from Let out property. You can declare your property as Let out property. Please check my following post for more details
https://www.nitinbhatia.in/personal-finance/income-from-house-property/
Hello Sir,
I have taken a joint home loan of 10 lakh from sbi . I am co – borrower of loan while my father is main borrower. I am also co – owner of the flat puchased while my father is main owner.
Flat is to be registered jointly in our name .There is nothing mentioned in sale deed about percentage of ownership/loan sharing.Total EMI is being paid by me from my salary account.
My question is .
1. can i claim 100% tax rebate on interest paid on home loan ?
2.How to show IT department that all EMI has been been paid by me?
3. Is it necessary to make a loan sharing agreement?
4.Can one go into another agreement regarding ownership percentage and home loan sharing even after registry made in joint names where no percentage is mentioned?
HOW MUCH COST OR STAMP DUTY WILL IT REQUIRE .
please reply soon .
1. Yes provided your father is not claiming any tax deduction.
2. Bank Statement is sufficient
3. You may execute but not necessary
4. Not required. If % ownership is not mentioned then by default it is assumed that all owners have equal share in property
THANK YOU sIR.
Hi Sir,
Thanks for all the important posts. Few years back I purchased a flat in Bangalore and took a loan for Rs 25. The current EMI for my first home loan is about Rs 24000. I have moved into this apartment only about a year back. Since I have some money from savings, I want to purchase one more flat for which I need about another 30 lakhs loan. This would be my 2nd home loan. I have couple of options by I do not quite know how to go about them. My question is following:
a) I am already availing the tax rebate on my 1st home loan for which the EMI is 24k. Will I be able to get a tax the rebate on my 2nd home loan for which the expected EMI would be 30K?
b) Another option I am considering is to repay my 1st home loan completely and then apply for 2nd home loan. That way I can also increase the loan eligibility to about 45 lakhs and I don’t have to manage two separate home loans. Please note that 2nd flat is under construction property that will take another 4 yrs to complete. And I would preferably move to 2nd home later, giving the 1st one on rent.
What do you think would be the best thing for me to do at this moment?
a) you can declare 2nd property as let out and claim loss from let out property. Please check my following post for more details
https://www.nitinbhatia.in/personal-finance/income-from-house-property/
b) You can close 1st Home Loan and then avail home loan for 2nd property to increase eligibility.
Hello Sir,
Thanks for this helpful information. In 2010 I bought a Flat in Hyderabad for which I borrowed a loan of 13Lakh for 15 years.Occasionally I made prepayments & at present the outstsnding loan is 8.1 lakh.( its underconstrcution & will get the possesion by next June 2015.
Meanwhile I bought Second flat ready to occupy in HYD in last June for which I borrrowed a loan of 20Lakh for 20 years. But when I calculate the interest for both the loans, the interest paid towards is much more.So planning to close the 1st loan or prepay the second loan( in dielema what to do?)
Two questions:
a.What is best option? to close the first loan or prepay the second loan? as I’m paying more interest for my second loan?
b.Under section 24(tax benefit for interest payment) the max interest amount deductable is 2Lakh. so consider if my taxable income is around 7 lakh with section24(2 lakh deduction from interest) & without Home loan it will around 9 lakh, then in first scenario I be will paying tax around 65000, & in second scenario it will be 105000. So difference is 40000, so it is wise to take a home loan to save tax? or is the planning to beat the inflation? pls clarify
FYI: for section 80C I have more than 1lakh insurance & PPF
will be eagerly waiting for your reply..thanks in advance
To answer this query, i need to do financial calculations of your case. For any personalized consultation on chargeable basis. You may click on following link.
https://www.nitinbhatia.in/advisory-service/
Hi Nitin,
Needless to say your blogs on home loans and other are very
tremendous and very educating us.
I have taken Home loan(HL) of 24.5Lakhs in June 2013 at
LICHFL with interest rate of 10.25%(2 year fixed)
Outstanding Principle amount now is 22.5 Lakhs.
My Take home is increased when compared to the time of Loan availed.
When I read through your blog, I came to know hiding factor
in HL.
I need your suggestion on repay home loan faster.
1. I have around 90K take home and I can pay 40-45%
of that towards EMI.Can I increase my EMI?
2. I have PF a/c balance around 3.5 Lakhs. Can I
withdraw and pay towards HL ? I have a proposal of taking a plot nearby
Vijayawada(Andhra Pradesh). Can I utilize the PF amount to buy plot OR can I
keep my PF as it is ?
3. I can save 2-3 Lakhs per year other than EMIs
.Can I pay this towards HL?
4. Some blogs says it’s better to continue HL to avail
tax benefits. In that case, How can I diversify my money in different schemes.
Thanks,
Venkat
Dear sir,
After going through your blog, I really became a fan of you.
I have a one doubt reg HRA and Home loan benefit. I had purchased a 2BHK flat in kolkata by availing Home loan from LICHFL. I had the completion certificate from municipality as well as possession certificate from builder.presently I am availing benefit of EMI Principal u/s 80 & EMI interest benefit u/s 24(b).
I am not getting tax benefit on HRA.
Presently, due to some constraint, i am not able to stay in the flat and staying in a rented house near office.
Now can I get both HRA and Home loan benefit?
If not, if i give my flat on rent and declare annual rental value as my income, then can i get both home loan and HRA rax benefit?
You claim both HRA and Loss from let out property. You need to convince your HR that due to geographical constraint you cannot stay in your own flat.
Sir,
It appears from your post that HRA Can only availed in the same city provided the flat is declared as “let-out” only.
It also appears that HRA and Home loan benefit may not possible to receive simultaneously in the same city if the purchased flat is not declared as “Let-out” (or ” Notional Rent”) is not declared.
please clarify.
Your understanding is correct. It also depends whether your employer and IT department accept your justification or not.
Sir,
I had discussed the matter with Account Section of my office. They are little bit confused.
It has been told by them if I had purchased a flat in another city and staying on rent in Kolkata at my office place, then I can claim both HRA and Home Loan Tax benefit and I had not to show any rent received or notional rent from my flat purchased on availing home loan in different city away from my work place.
They further stated that if any employee stays in office accommodation ( in the case no HRA will be given to the employee and full HRA is Tax exempt as the HRA will not be reflected in the Salary Slip also), then they are little bit confused to extend the tax benefit of home loan for the flat purchased on availing Home Loan in the same city.
I had clarified them if I had declared “Notional Rent” (or actual rent whatever the case may be ) on the flat purchased on availing home loan and taking HRA benefit due to stay in rented house in the same city, then legally it is not against the income tax rules.
However, they kept silence on the matter and told that there is no clear-cut instructions in this regard.
In this situation, If my office does not extend both the benefit of HRA and Home Loan benefit, can I claim it while filing IT Return by making fresh calculation in the Form 16 provided by my office? If I do so, can I get into trouble in future with IT Dept?
Please advise on the matter please.
As i mentioned in my previous comment that if you can justify the same then you may claim
Dear Sir,
Thank you very much for your valuable advice. As I feel the consideration of Income Tax in my case is somehow depends on “Justification” and not straight-forward cases.
However, I just want to clear one doubt. I had purchased the flat by availing Home Loan jointly with my wife. The home loan first borrower is my wife and second co-borrower is myself. However, I am paying the full EMI from my salary account and I am only claiming claiming Tax benefit u/s 24(b) and 80C. My wife is not claiming any benefit and I have submitted an Undertaking to my office in that effect. The property is the name of both of us i.e. we are both co-owners.
If Rental income has to be considered from the property, then the Annual Income from property has to be divided between two of us u/s 26 of IT Act?
For an example, If I receive a rental value of Rs 10,000/p.m. from the property, then I have to consider Rs 5000/- as my earning and Rs 5000/- for my wife’s earning. ( As in the “Deed of Conveyance”, no percentage of ownership of the property has been mentioned, i.e. by default, it implies that both of us has a percentage of 50% share on the ownership).
It is requested to please clarify the same.
Your understanding is correct.
Thanks for your reply.
sir,
i’m in professional field.
now i’m doing a private job, getting salary around 75000/-pm, thinking for home loans.
but i’ve no savings,no insurance,no mediclaim. i’ve dependant parents,and spouse.
how risky is it if i take home loans?
please suggest
It will be quite risky considering the points shared by you. I suggest you plan your home loan.
Hi Sir, I am also a working professional with a 70K inhand salary, was thinking of booking a property worth 31 Lakh, the possession of which will come in the year 2018. I guess I will not get a tax benefit untill I have possession? Also, I have only approx 3Lakh in savings which I will use for the down payment. Post that I will not have any liquid cash left with me. Can you kindly advise if it will be ok for me to go for the loan?
You may go ahead with the home loan. The first risk is whether the construction will be completed on time or not. Second risk is that you don’t have contingency fund equivalent to 3 months household expense and 3 month’s EMI.
Sir, I’m planning to take home loan. I’m a IT professional with around 38k in hand salary. Actual planned cost is 25L. As per my knowledge, bank will give 80% of the actual cost. I want to claim full amount because i dont have enough savings to bear the 20% cost. Please suggest me, Is there any other options to adjust.
I am afraid that you will get 100% funding.
Thanks for your reply Sir !!
I will get only 80% of the estimated cost. Rest i should put from my savings. Checked with bank, for my salary they can give max 20L. Can I increase the eligibility by submitting LIC premium proof. I hope it is also considered as asset.
It is not feasible. You can take loan against your insurance policy.
Hi sir,
My Name is rajeesh from kerala. 15 months before I took 9 lakhs home loan from federal bank. Loan actually with my mother’s name. 1 laksh and interst I paid already and presently I have 8 lakhs debt. Actually this tenure was 5 years but now I wish to close all the remaining burden amount with in 10 months. Can you explain me the procedure.
Thanks
You can simply deposit the prepayment cheque with bank. After the home loan closure, please follow steps as i shared in following post
https://www.nitinbhatia.in/home-loan/home-loan-closure-5-important-points/
Thank you sir…
All points made very fairly. Thanks.
Hi sir,
Very nice information.
I am buying second home for 30 lakhs. I have 30 lakhs in fixed deposit (interest rate 8.5%). I do not have any loan right now. Shall I go for this property with home loan (interest rate 9.5%) to get tax benefit and thus reduce the overall cost towards the property? Please suggest.
It require financial calculation considering all the facts. Normally in such cases it is financially beneficial to buy from own funds.
Hi Sir,
My Home loan remaining is 19L only and tenure is only 12 Years. I have gone for prepayment but Branch Manger advised that you will loose 2L Tax benefit. Please advise me is it good to pay Loan Payment or should I hold back and just increase EMI to reduce term and put CASH Liquidity in FD?
You can prepay. I think bank manager is not aware that you are paying approx 10% interest on home loan. Banks will always resist prepayment, you may go ahead.
Hai Sir,
I am taking an home loan for 20 lakhs at ROI of 9.50 for a tenure of 15 years. Total monthly income of mine is 43000. I need to pay nearly 22,000.00 as EMI. Is it risky? but i am planning to sale my another land and make prepayment?
Kindly reply sir.
Your EMI is approx 50% of net take home salary. It is common practice provided you don’t have any other huge liability. I don’t foresee any issue. In my opinion, you should not sell another property for prepayment.
hello sir
my monthly income is 40000 and i am taking as 42 lakh(38 bank loan +4 margin money) rs house with my bank housing loan scheme including 10% margin money(by me). my emi is 19000 rs. is i am eligible for tax rebate for principal and interest. this is my first house to purchase.
You can claim tax benefits on Home Loan. You are not eligible for tax deduction u/s 80EE as the loan value is more than 35L.
Thank you for the reply sir. But my rate of interest is floating. Is it an issue?
No. It is not an issue
Sir,
The contents of your posts are highly informative in their context & they really impress the readers on account of their comparative visualisations of figures in the actual conditions. Meanwhile as a bearer of home loan since December 2015 for an amount of Rs.55 lac (EMI @ 55K), I too need your esteem’s advise on certain issues. I do genuinely vouch for your views on the issue of prepayment of home loans & agree to the fact that these are liabilities under all circumstances & should be done away with at the earliest.
I have already pre-payed an amount of Rs. 26.0 lacs out of the total loan amount of Rs.55 lacs through pre-matured FDRs & savings without reducing my existing EMI of 55K. I have another stand-by pool of Rs.26.0 lac odd amount from sources like FDR/RD’s/ EPF/PPF etc which are all in pre-matured status.
My question is should i go ahead and short close my existing FDR/RD’s/ EPF/PPF to close my home loan & start all over again in building my savings coffers from scratch. it may also be worth to mention that my existing flat is self -occupied & i ‘m employed with a pvt organisation with a take home salary of 1.0 lac approx. per month.
please do advice.
I am going to buy Flat in Pune. Flat cost 48L and My present take home 59K. I have down paid 15L and I am going for 33L of home loan.
1st question:
I have another 3L cash in my hand. Can I pay it and reduce the loan amount?
2nd Question:
what is the best approach go for home loan or loan against policy?
3rd question:
Can I borrow from both party against policy and home loan?
Example: 20L from home loan from Bank and 10L from Policy.
1. You can prepay 3L. I am assuming you have maintained your contingency fund equivalent to 3 months EMI and 3 months household expenses
2. Though it is subjective but i will prefer home loan as the interest of home loan is less than loan against policy. You can also avail tax benefits against home loan.
3. Possible
Subject: I-tax benefits u/s 80C & 80EE+ 50,000/- and I-tax benefits expenses on medical treatment
Sir,
1. I am working in central govt services (CWC) at New Delhi. I had purchased a 5 year old ready to move house ( 08/2016 and taken key ) at Haldwani (Nanittal) registry made in favor of my wife (House wife & fully depend on me) amounting to Rs. 36 Lakh + registry expenditure Rs. 1.64 Lakh + loan expenditure 0.26 Lakh Total amount Rs. 37.90 Lakh. I had taken advance from my GPF for above house Rs. 7.90 Lakh as margin money. Loan taken from LIC–Home loan Rs. 30 Lakh at EMI Rs. 27950/- per month for 20 year. Due to length of my service (below 3 year) LIC-HL sanction loan Rs. 30 Lakh in favor of My wife (Applicant), Myself and My son (Co-applicant) working in private org at Gurgaon & his services balance about 28 years). Can I take I-tax exemptions u/s 80cc & U/S 24 along with additional special rebate Rs.50,000/- Or my son can be take up the same. Now I want your help about Income-tax rebate as per current directions of CBDT.
2. Today I am facing / suffering critical disease after providing of STUNT at MAX-Saket on 25/26- 06-2016 till date and due to wrong treatment / Reaction of medicine, I was facing failure of Multy -organs as Kidney, Liver, lungs & Skin (DRESS SYNDROM) etc. during the period till date, I was admitted 02 times at MAX-Saket-Delhi, 01 times at Mool Chand hospital-Delhi and 02 Times at AIIMS-Delhi
A. I had taken all bills as per rate of CGHS but my department not reimbursement in full bill amount so that can I take Income tax benefits at balance amount of bill because it is my income loss.
Now I want your help about Income-tax rebate as per current directions of CBDT
Thanking yours.
B G Garg
Pan: ACWPG5799E
Ph. 9891941499, e-mail bggarg123@gmail.com
1. As the property is in the name of your wife therefore only your wife can claim income tax benefits.
2. You can claim tax deduction on balance amount as provided under income tax act
Sir, I have taken 115000/- home loan from Union Bank at 9.55% ROI EMI 9775/- six months has been passed my present outstanding is showing 1147000/-. Sir, my father is giving me 300000/- rs for prepayment, please advise will it be worth for prepayment.
You may prepay.
I am planning to take a home loan of around 18L. EMI being Rs. 15401 for 30 years. I have no Savings, Insurance, Mediclaim. How risky it is to take the loan? And what are the facts i should consider and plan the home loan?
It is quite risky. Before availing home loan, you should put your personal finance on order. Also you have not mentioned your monthly income.
Personally, it depends on your and your families choice…Each has its own advantages and disadvantages…It also depend on location. I will prefer flat because of security reasons.
My monthly fixed take home is ~ 1.15 lacs and I get variable pay of around 4-5 lacs per annum, I have bought a site in a gated community for 75 lacs and currently I have outstanding loan of 25 lacs (after pre-paying 4 lacs in last 6 months and my loan is running july 2016) and my monthly EMI is ~25k and the overall tenure is 23.5 yrs, I’m in confusion whether to start construction or pre-pay and close the existing loan amount using PF money and the money in homeloan overdraft account (~25 lacs in all), if I had to construct I might need to take another 35 lacs of loan (considering ~25 lacs saving that I have).
Can you please guide me on what should I do ?
It depends whether you would like to construct for self-occupation or investment purpose. If for investment purpose then how much rent you can fetch.
Thanks for your response to my query, it’s mostly for self occupation including one portion for rent and the rent would be approx ~12k.
In my opinion, you can go ahead provided you expect 5%-7% annual property appreciation. As you mentioned you are not expecting any return then in that case it makes sense to close the existing loan.
Hi Nitin
i am really confused andd need your expert views ..
i have a home in pune and loan amount is 25 Lac. i am self occupied.
i am planning to buy new home in Navi Mumbai …as i know i can avail full intrest deduction whe i show flat is on rented.
i would like to know if i buy under construction proprety is good move OR ready possession (90 lac) , loan 65 lac i.e EMI 65 thousend and rent 18K ?
please suggest me
I will suggest ready to move in or resale property.
Dear Sir,
I m NRE and planning to take an home loan for INR 25,00,000/- for tenure of 20 years with a floating interest rate (presently 9.5%). As I m planning to pay some amount in lumpsum in middle of the tenure, will it be profitable for me as the lumpsum amount get deducted from principal amount only or Interest only or from both?
Any prepayment is adjusted against the principal outstanding. The interest is adjusted accordingly though EMI may remain the same.
Hi
I have two Home Loan one is running from past 7 years and Loan amount was 23 lakhs and outstanding amount is 17 lakhs.
Second home loan amount is 36 lakhs and outstanding amount is 33 lakhs and tenure remaining is 13.5 years
I want to close one loan and I am confused which one to close because if I close my second loan then income tax benefits whatever I have taken I need to repay? Also more interest I need to pay in second one only since that is my latest homeloan and old One have already deducted interest part in first 6 years
Pls suggest
It depends on the interest rate and status of each property i.e. self occupied or let out.
now i am get 22000 rs salary per month. i am ready to apply 15 lakh sbi housing loan. 15250 rs per month. for 14 years. can i apply this?
I am not sure how will you manage your household expenses. The EMI should not exceed 50% of net take home salary.
I’ve 2 home loans from PNB. one property is self occupied and the second on is let out property. I’m planning to close these 2 loans and instead take loan from my parents to close this.
my parents would sell the agricultural land to get the required money to land me and after that they would have no income source other than the EMI that I’d pay to them
I understand that I’d loose 80C advantage and I’m OK with it.
Could you please suggest on what all paperwork/ documentation would be needed and what are the pros and cons for borrower (me) and lender (parents)?
1. You need to sign home loan agreement with your parents. Rest all conditions will be as mutually agreed upon between you and your parents.
2. I am assuming land is rural agricultural land else capital gain tax will be applicable. The interest on loan will be taxable in the hands of your parents. Other pros and cons vary from case to case basis
3. As i mentioned if land is rural agricultural land then it is exempted from capital gains.
Thank you sir. It helps. We you stated the pros and cons would very from case to case… I’d like to take your help and share my scenario with you, but not in the public forum please… How can I reach you? I could not find your email ID
Just to add personalized consultation is available on paid basis. You may check phone consultation/advisory service link on top menu.
Hello Nitin,
Thanks for your post about home loan. :)
I would like to know about claim of HRA+Home loan.
So, in my case, I live at a flat which is a property of my Father and my own flat is a let out property. Both the flats are in the same building and surely are in the same proximity of my office.
Q1. I’d like to know if I can claim the benefits against HRA along with Home loan?
Q2. Also, if you could please share an example about calculating profit/loss on selling a flat. I mean, if I have purchased a flat say in 24L and paying EMI’s for last 4.5 years, say 22K, I have paid 11.88L till now to the bank. Remaining principal amount is still 17.5L. If I decide to sell this flat, how should I calculate the price? Based on your post, if I would have deposited the same EMI (22K) even in a Bank RD, my maturity amount would have been grown up to ~14L.
So if possible, please share an example which is finding the growth of that investment and the taxation against it. Tax in terms of the Home loan benefit for 5 years and if selling it after 5 years then the capital gain.
1. Your property will be considered self occupied and you cannot claim HRA.
2. Please check my following post on how to calculate income from house property
https://www.nitinbhatia.in/personal-finance/income-from-house-property/
For returns, you can use XIRR function in excel. Please check my following post
https://www.nitinbhatia.in/personal-finance/return-on-investment/
This is one of a kind blog. Thank you for insights.
My Situation:
Home Loan of 24L started in March 2014 for 15 years at floating interest rate or 10.15 and EMI 26K.
Current outstanding 21.34L, interest rate 8.65, EMI same as 26K, tenure left 10.5 yrs.
I had to left for international assignment and not able to claim tax benefit since last year.
I have surplus amount should I repay home loan or keep investing in FD.
I read somewhere that it depends on how much tenure is left.
Your opinion will be helpful in making decision.
In my opinion, you should repay home loan as you are not claiming income tax benefit.
Hello Nitin,
Thanks for your post about home loan.
I’ve a question about home loan.
I’ve taken home loan from SBI, being a co-applicant with my father as main applicant.
And I’m paying all the loan amount, as my father doesnt have any income now. But, the property is in my father’s name. Due to this, I’m not able to claim any tax benefits. I didnt know that I should be a co-owner of the property to get tax exemption, neither the bank officers told me about it. Now, Is there any way to get tax benefit for me ? Is it possible for me to become a co-owner of the property now? Im loosing almost 70K every year because of this. Please help me.
As the property is mortgaged therefore any change in ownership is not possible. Still you can approach bank and check with them if they allow change in ownership but probability is almost NIL as there is NO valid reason to change the ownership.
i have a home loan of 24L. I am just start repaying emi from 2 months from now..
Now I am paying the interests only. ..
I am an NRI and no other income is available for me ..
I have some savings on chit funds which will be matured in another 3 years another
in 4 years…
What should I do with that amounts ? Which will be better for me to close the home loan or invest in fd or mutual funds… ? take the interest and repay by emi in home loan ?
(My daughter will be at marriage age by the time I get my chits matured … )
3-4 years is a long time to decide. I suggest that we will take decision at right time.