Home loan helps save on Income Tax

BANGALORE: The reduction you can declare against the payment of interest on a home loan from your taxable income is a major saving. It is specifically so as the interest component is higher than the principle amount in the initial years of the house loan tenure. The amount of awareness paid can be availed as a reduction under Section 24 of the Income Tax Act under the head ‘Income from House Property' while assessing the total earnings for the year.

 The interest paid on a home loan is deductible from the lease income of the property too. When the house is let out, the complete interest on the home loan may be deducted from the rent received without any ceiling on the amount. However, in case of a self-occupied property, the amount of interest deductible is restricted to Rs 1.50 lakhs or the exact interest paid, whichever is decrease. This can be set-off against other incomes – salary, earnings from business etc, whereby the tax liability decreases.
When the house is self-occupied, the interest reduction can be claimed only after the home is completely constructed. Further, interest pay in the pre-construction period can be claimed as a deduction in 5 equal premiums, in succeeding assessment years after completion of construction.
Apart from reduction of interest paid from the taxable earnings, repayment of the home loan (principal amount) can also be claimed as a reduction under Section 80C of the Income Tax Act subject to some conditions.

They are:

• the building of the house should be completed in the earlier year.

• Income should be generated from a property that is taxable under the head ‘Income from House Property’ or it is deemed income from a house property as per Section 23(2) of the Income Tax Act.

• The amount of benefit is restricted to Rs 1 lakh (as the maximum deduction under Section 80C to Section 80CCE cannot exceed Rs 1 lakh). The other amounts which also qualify under this Section are payment of life insurance premium, contribution to Provident Fund, purchase of NSC etc, the overall limit for all these including repayment of home loan is Rs 1 lakh.

‘Loss from property’ can be written off
Loss from a home property arises due to claiming deduction against maintenance charges, and interest on the home loan from the rental income. If the sum of the two elements is higher than the rent received, it results in a loss. This amount may be set-off against other earnings – salary, income from business etc.
The loss from house property can be set-off against any income (salary, business income, other sources of income like interest on FD or capital gains) of the present assessment year. If the entire loss cannot be set-off in the same assessment year it can be carried forwards to the next 8 assessment years. However, the amount of loss carried forward can then be set-off only against ‘Income from House Property’ and not against any other income in the subsequent years.

Some aspects to judge for prospective borrowers

Apart from considering the tax advantage while taking a house loan, these factors also have to be borne in mind:

• Identification of the home

• Title to the house

• Earning and pay back capacity

• Initial margin money which is has to be paid

It is desirable and advantageous to think of buying a house at a younger age as the repayment capability will be better as there will not be any other biggest commitments such as children’s education, main healthcare expenses etc. Availing a home loan at a young age will also inculcate economic discipline and you can become debt-free sooner, well before retirement life.

Making a financial plan

A financial plan varies from for everyone – needs, commitments , returns on savings, insurance cover (both life and medical), the availability of funds/resources (investible money) etc. A financial plan and investments must be made keeping in view various factors. The investments should have a mix. They should be both long-term and short-term, and should also bring you the advantage of capital appreciation. Short-term investments are needed for liquidity – in case of immediate need or an emergency. The long-term investments you plan can comprise real-estate.

How it works

Rent received: Rs 2 lakhs
less: 30 percent standard reduction – maintenance charges: Rs 60,000 Interest paid: Rs 1, 50,000
total: Rs 2, 10, 000.
Loss from house property: Rs 10, 000

 
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Impact of Metro on Bangalore Real-Estate Development

Bangalore: Bangalore location has taken a major development of real estate market that is one of the known truths. As the metro completes in all the locations there will be a great influence on improvement areas of North, South, East and West. It is estimated that there will be a hike of 25% in upcoming years. Realty Developers are coming up with a lot of innovative ideas to make change in the Bangalore locations.

The striving project of a Metro will change the scenery of Bangalore city. The growth will stretch its borders in Bangalore. It has a well conceptualized plan this is designed in the manner in which to cover all the corners of the Bangalore location. Surely it assures a development of micro markets and it also help to reveal many places which are congested in metropolitan silicon city.

Totally the Metro Rail route comprises of 42.30 kms in that east-west corridor covers 18.10 km and north-south corridor covers 24.20 kms. The east-west corridor begins from Baiyappanahalli in the east and reaches up to the external ring Road of Nayandanahalli by connecting Mysore Road in the west.

The north-south corridor starts from Hesaraghatta Cross on Tumkur Road in the north side and reaches up to Kanakapura Road by connecting Puttenahalli cross in the south. On 2011 Bangalore Metro Rail Corporation Limited (BMRCL) has already completed a part of east-west corridor from Baiyappanahalli to MG Road, which also covers Indira Nagar, S V Road, Ulsoor and CMH Road.

Five Most Preferred Locations in Bangalore for Real Estate Investment

Bangalore: As per 2014 survey Bangalore, being as an IT capital of the country witnessing a robust increase in real-estate. The city is considered the almost all preferred location for investment. Over the decades, the metropolitan city is witnessing a huge progress in IT/ITes sector. Presently, Bangalore has been a hothouse of household and commercial properties and also received many appraisals from the mass media. More people from other nations and countries moving into the city for job opportunities and this is one of the major reasons for real-estate growing that differentiates the location from other metropolitan cities in India.

The investments in Bangalore may truly be a profitable way to cash because the city delivers beneficial conditions for living and earning. Real estate buying requires lots of concerns to be thought about and the location becomes biggest concern. The majority of admired suburbs for Real-estate investment in Bangalore are Marathalli, Whitefield, Electronic city, Sarjapur Road and Bannerghatta Road.

Marathalli:

As per the research Marathalli continues to be rated as the top real estate rich area. This exactly situated in the East zone of Bangalore. Slowly, Marathalli has turned in to busiest vicinity that satisfies the residential needs of people working with MNC Organizations at Sarjapur, Bellandur and Whitefield. This suburb is positioned on the outskirts of Bangalore city with propinquity to Hal Airport, Electronic city, Sarjapur and Whitefield. This area is well structured and has made it 1 of the primary destinations for property investment. This renders the best connectivity in and around the city; this becomes the reason for its viability in topping the listing of best preferred locations for real-estate investment. The name itself explains that, Halli means a village in Kannada and Marut is a fighter Aircraft.
 
WhiteField:
 

Presently, Whitefield located in east Bangalore retained as a top spot among buyers in Bangalore city. This area is followed by Marathalli, Sarjapur Road, Mahedevapura and varthur Road with significant improvement from the last year. Improved connectivity and mushrooming of High schools, Malls, High class hotels, Theatres near Whitefield made this as an attractive suburb. Proximity to IT Hubs, Technical parks and MNC Companies, improved connectivity due to flyovers, Outer ring Road and broader roads have ensured that Whitefield continues to top the list of preferred vicinities in Bangalore city for Real-estate investment.
 


Electronic city: 

Electronic city bagged the 3rd rank as a preferred location for real-estate investment from last quarter. In silicon city, Electronic city is one of the biggest IT Park in India. Being as Panchayat Town, Electronic city offering world class infrastructure with biggest multinational organizations like Wipro, HCL, TCS, Infosys, IBM, Biocon and many. The area is one of the economical vicinities in Bangalore providing a large array within the Rs 50 to 60 Lakh range. The presence of metro, Shopping malls, Hospitals, Educational institutions have pushed this area as a top on the investment radar.

Bannerghatta Road:

In south Bangalore, Bannerghatta Road is another popular residential hotspot which is centrally located and is one of the remarkable vicinities. The first quarter of the year witnessed this area as a prime location for many buyers and investors. This vigorous mix of buyers and investors is supplied to depict the stable progress in this locality.

South Bangalore witnessed the commencement of the IT Hubs; it has been a preferred commercial and Residential locality and continues to extract focus from occupiers. With the Outer Ring Road connectivity, Hosur Road Express way, Upcoming metro lines, intended widening of arterial roads the south zone has expanded advance towards peripheries’. These all features ensured availability of land benefits.

Sarjapur Road: 

Sarjapur ORR come up as a preferred office destination, a signal free corridor initiative is an additional advantage for this location. This location is mainly favored due to the presence of good commercial infrastructure and residential micro markets in the vicinity. This area came into prominence due to several factors like proximity to central business districts, Physical and social infrastructure, availability of large land parcels, connectivity to the airport and many other. This area provides better transport links in and around Bangalore location, in addition to the growth and development of IT parks. The largest price listed under the commercial and household real-estate segment. The affordability in prices is attracting potential investors to invest in these localities.

Mistakes To Avoid While Selecting A Real Estate Adviser

There are many independent ways of getting a great buyer (or seller) but a good real estate agent is a specialist whose expertise can add extra value to your search.
“A good quality real estate agent or consultant is a specialist, someone who has been in the realty business for long and knows the ins-and-outs of recognizing the perfect property for your price,” says Arindham Chaturvedi, a software specialist, who returned to Bangalore after a gap of over a decade. “We had a beautiful non-negotiable list of requirements while it came to buying a property and our consultant was able to meet almost 75 per cent of them. There is no method we could have found our dream home had it not been for him.”
 

So what is the advantage that this professional brings in?
“A great realtor, especially in the luxurious category, will 1st recognize your preferences and then get back to you with a number of choices that fit those needs,” says Vidyut Prabjot, CEO, Luxra Real estate Consultants. “This may take time but when the client/family visits the specific properties, it makes it really worth their while.”
How do you choose a great agent who can get you the right home for the set budget?
Select the broker and not the quoted cost. “Clients often select brokers depending on the prices quoted,” says Krishnappa Arjun Kamath, proprietor, Anirudha Realties Consultant. This is a basic mistake that both sellers and buyers make. “You do not select a boutique depending on the budget, but on the quality of the dresses shown, when it comes to clothes. Similarly, when you choose a broker to buy or sell a property, which is clearly a more expensive venture, it is the high quality of service and alternatives that an agent can provide that should be higher on the top priority list,’’ says Prabjot.
Selecting an agent merely based on the highest/lowest pricing is not realistic.
“The 1st quoted pricing is not at all times the best as rarely does a deal near at the same rate that was quoted initially,” says Kamath. “Too many properties languish for much time in the market merely because some adviser has been overly aggressive in pricing.”
Comparable sales and a thorough understanding of current market trends in the set segment are the best guidelines to arrive at the best price.

Network vs. experience

Individual suggestions are the best brokers to check out first. “A friend who has had a good experience with an agent is one of the perfect reasons why you should checkout his services,’’ says Kamath. “Relying on family connections simply to save on a small percentage spent on the commissions cannot be a brilliant move in the long run.’’

Other points to gauge include:

- How familiar is the broker with the neighborhood and the life-style you are looking for.

- Is the real estate segment you are targeting, within the expertise of the agent?

- Does he have the ability to listen to what you look for?

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