Although each one of us wants to buy a house, not many can afford at the prevailing market rates. Although the market has seen some correction, still properties are much beyond the reach of a common man. Unless ofcourse, he avails Home Loan. It is a loan given by various banks and Non Banking Financial Corporation’s (NBFC) to buy property. The said property remains mortgaged with the organization lending the money. A particular rate of interest is charged on the principle amount and a monthly EMI (Equal Monthly Installment) is made which consists of part interest and part principal amount.
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Home loans have made life very easy for the common man, who tills their advent, could only dream of buying a property. Although one still needs to pitch in with at least 15% or thereabout, of principal amount of the property, still the homeownership has come well within reach. One can easily take a property on Loan and then pay the EMI’s and that too over a long period of time or give it further on rent and pay the EMI’s through it.
There are many companies who are providing Home Loans to the customers. Companies like India Bulls, DHFL, Karvy, HBD etc are in the business of providing Home Loans. Besides these companies, all most all the nationalized banks along with some private banks like ICICI are into providing Home Loans. Even LIC, the national life insurance giant, has ventured into Home Loans and is providing loans at competitive rates. Upon applying, the persons ITR’s and Bank transactions are checked and after seeing his credit history and verifying his personal credentials, a loan is disbursed within a period of one week. It has become very fast and simple. The loan is generally disbursed to the seller, whether it is an individual or a real estate developer.
Home loans have made life really easy for the working class who are dependent upon their salary every month. Saving money every month and then buying a property would mean that one would hardly be alive to enjoy the benefits of the house he has bought. With Home Loans, one gets to enjoy dual benefits of homeownership and tax benefits, which are additional bonus. The Indian revenue system recognizes the interest paid on home loan as an expense and is deductable from the tax to be paid. This proves to be an additional tax benefit from home loan. General public is not aware of this fact of dual benefits of homeownership and Tax benefits which can be availed from home loans and generally overlook it while filing their returns. One should always keep in mind that the tax paid should be deducted and benefit availed.
As the EMI does not state the detailed breakup, one can request the company to pass on a detailed list which enables the payee to understand the breakup of the EMI. Since it is paid monthly, the amount of interest in an EMI differs every month. One should be sure that only the interest part of the EMI can be deducted from the Tax and not the principal amount. Hence the breakup of the EMI is needed to avail this benefit.
In case of a person owing two houses and both on home loan, he too can avail the tax benefit, but one should keep in mind that upon stating the second house, one house automatically is considered to be given on rent even if it is not, and a rent at market rate is charged as the income of the assesse.
Although home loan is an expense and a burden which has to be paid every month, still, with the dual benefits which it provides it’s worth the effort.
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