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Last Updated : Jun 09, 2016 06:31 PM IST | Source: Moneycontrol.com

First time home loan takers & finer points of extra tax benefit

There are several details that should be the focus of the individuals and the conditions that come with this extra benefit.

Arnav Pandya

The process of claiming additional tax benefits for a loan for the purpose of a first time house purchase needs to be seen closely. While the overall benefits are known there is also an element of fine print that is present here and this would have to be followed closely so that the benefits are not denied. There are several details that should be the focus of the individuals and the conditions that come with this. Here is a closer look at how the conditions will work out and what has to be considered when the benefit is to be claimed.

First time house buyer

The benefit of the extra deduction is for Rs 50,000 and this is over and above the Rs 2 lakh limit that is present for the repayment of interest under Section 24. The main condition for the extra benefit is that the individual should be a first time home buyer and this would mean that they should not have owned a home before. This is a crucial detail because a lot of people would actually get eliminated if they try and claim the benefit as they would already have owned a property earlier. The manner in which the tax authorities can determine whether a person is a first time home buyer is by looking through the past returns because this should never have had any item under the head income from house property. In that sense it is very simple to identify who is a first time home buyer.

Any financial institution

The loan for the purpose of the purchase of the first house property has also a wide area for coverage in terms of the entity from whom this is taken. In many cases there are restrictions on whom the loan can be taken from and this section too lays down the entities from whom the loan will enable the benefits. The term is any financial institution and this is a wide term as far as the institution is concerned because it would bring housing finance companies, banks and even other financial institutions under its ambit. However this would exclude loans taken from another person and other entity that is not financial in nature.

Sanction

There are a couple of conditions related to the property and this is that the value of the property should not be more than Rs 50 lakh and the loan value should not be more than Rs 35 lakh. This is a clear detail and there will be many properties and transactions that are able to fulfill this condition. In addition there is also a detail that the loan has to be sanctioned between April 1, 2016 and 31 March 2017. This becomes a crucial point because the sanction has to be between these dates and the individual would have to ensure that they get the sanction during this time period only. Being early or late would not work and this needs to be watched because many people might have got it sanctioned earlier than the date.

Benefit will continue

The best part of the process is that the benefit of the extra deduction is not a one-time benefit but that it will continue into the future. This will be extended till the time period that the repayment of the loan continues and this could be for any number of years because the housing loans are long term loans. This makes the benefit really far reaching because the individual will be locking in the gains for an extended period of time and this is something that can allow for future tax planning in an effective manner.
First Published on Jun 9, 2016 06:31 pm
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