Planning to buy a Dream House….?

Summary

  • Self-Occupied House is an important/crucial asset In one’s portfolio
  • Investment can be done either to own a house or for pure investment purpose
  • People do invest in housing property in order to generate additional income in form of rents
  • Availing a loan can be one considered to finance for your dream house
  • Principal component on Home Loan is allowed to be deducted u/s 80 C
  • Interest component on Home Loan can be deducted u/s 24 (B)
  • Too high loan can be detrimental for the portfolio
  • One can consider taking a joint loan i.e. Self & Spouse


Basic Documents Required for Housing Loan

  • Application form with photograph
  • Identity & Residence proof
  • Last 6 months bank statement
  • Last 3 months salary slip
  • Form 16/ITR


Fixed Rate – Are They Really Fixed?

  • A housing loan with a “Fixed Rate” may not mean that the loan rate will remain the same throughout the tenure
  • Bankers have introduced a clause called “Reset”, which enables them to revise the rate after two/five years
  • The Reset clause is called Force Majeure Clause


Long-term/Short-term Capital Gains Liability

In case of immovable property being sold within a period of 36 months from the date of acquisition, the gain arising from such a transaction would be short-term capital gain and will be taxed at 30%.

In case the immovable property which has been held for more than 36 months, in case of sale, the gains would be long-term capital gains and the tax thereon would be at the rate of 20% with indexation & 10% without indexation.

Capital Gains Bonds

Long-term capital gain liability can be set off by investing in capital gains bonds as per the provisions of Section 54EC. However, the investments in such bonds should be made within a period of 6 months from the date of transfer or before the due date of filing the return, whichever is earlier.

Rental Income From Property

Rental income has to be taxed under the head 'Income from house property.' However only 70% of such income is chargeable to tax as 30% is considered towards maintenance expenses.

Gift Tax implications on Transfer of Real Estate

There are no gift tax implications on the transfer of real estate. However, after the implementation of the Finance Act 2004, any gift to a person who is not a relative, as defined by the Income Tax Act, would be taxable as income of the recipient on the market value of the gift. The relatives, as defined under the Income Tax Act, would not be liable to such income tax.

Capital Loss (short-term/long-term)

A capital loss (short-term/long-term) can be carried forward for a maximum period of 8 years from the assessment year in which the loss was first incurred.

A short-term capital loss can be set off against any capital gain (long-term and short-term); however a long-term capital loss can be set off only against a long-term capital gain.