Tax Benefits

The income tax authorities look upon with favour at those servicing a housing loan from specified financial institutions. It is up to you to be wise enough to take advantage of the home loan facilities provided by them.

When put in figures, this is quite an amount:

• Assume taxable income of Rs 4 lakh, placing the assessee in the highest tax bracket.
• Assume interest payment during the first financial year is Rs 1.60 lakh.
• Taxable income stands reduced to Rs 2.5 lakh (Rs 4 lakh - Rs 1.5 lakh being the maximum limit).
• Total tax amounts to Rs 49,980 (tax of Rs 49,000 + surcharge of Rs 980).
• Tax saved is Rs 45,900 (tax @30% on Rs 1.5 lakh plus 2% surcharge as the investor is in the highest tax bracket).

That brings us to Section 88 of the Income Tax Act.

You get a 20% rebate on repayment of principal during a financial year. Once again, over the years, the principal repayment eligible for rebate has been enhanced from Rs 10,000 to the current limit of Rs 20,000. Stamp duty, registration fee or other such expenses paid for the purpose of transfer of such house property to the assessee is also considered under this amount.