Legal Advice

Tax proposition

What are the tax benefits of home loans?
Ans.: Both principal and the interest of home loans draw tax benefits. With effect from 1st April 2005 (i.e. evaluation year 2005-07) under section 80C of the Income Tax Act 1965:Principal amount of refund of loan along with other saving such as PF, PPF, Life Insurance premium etc up to a maximum of Rs 1, 00,000/- will be entitled for deduction from gross income.Interest paid up to maximum of Rs 1, 50,000/- will be eligible for deduction from gross income on loan after completion of construction will be deductible from income from property.

What are the tax benefits of home loan ?
Ans.: There are evident tax benefits available on your Home Loan. Please check with your accountant to know of these benefits.

Documentation

What are the documents required for Home Loan?
Generally, the documents required to process a loan application are almost similar across all banks, however they may differ depending upon specific requirements and other factors.
The following documents are required by financial institutions to process a loan application:
Proof of age
Proof of address
Proof of income of the applicant & co-applicant
Bank statements of the last 6 months
Passport size photographs of the applicant & co-applicant

Salaried individuals

Salary slip / Form 16 A
A photocopy of the first and last pages of Ration card or copy of PAN/Telephone/Electricity bills
A photocopy of Investments (FD Certificates, Shares, any fixed assets, etc., or any other documents supporting the financial background of the borrower)
A photocopy of LIC policies with the latest premium payment receipts (if any)
Photographs (as applicable)
A photocopy of bank statements of the last six months

Self-Employed/Businessmen

A brief introduction of Business/Profession.
Balance Sheet, Profit and Loss account and statement of income with Income Tax returns for the last 3 years certified by a CA.
A photocopy of Advance Tax payments (if applicable).
A photocopy of Registration Certificate of establishment under shops and Establishments Act/Factories Act.
A photocopy of Registration Certificate for deduction of Profession Tax (if applicable).
Bank statements of Current and Saving accounts for the last 6 months.
A photocopy of Certificate of Practice(if applicable).
A photocopy of any bank loan (if applicable).
A photocopy of the first and last pages of the Ration card or a copy of PAN/Telephone/Electricity Bills.
A photocopy of LIC policy (if applicable).
A photocopy of LIC policy (if applicable).

If a flat is purchased from the builder

Original copy of your agreement with the builder.
7/12 extract or property register card of the land under construction.
Index II extract of your agreement with the builder.
Copy of N.A. permission for the land from the collector.
Search and title report (with the details of documents) for the last 30 years.
Development agreement between the owner of land and the builder.
Copy of order under the Urban Land Ceiling Act.
Copy of building plans sanctioned by the competent authority.
Commencement certificate granted by Corporation / Nagar Palika.
Building completion certificate(if available).
The latest receipts of taxes paid.
Partnership deed or memorandum of association of the builders firm. 

If the property being purchased is in a Cooperative Society

Original share certificate of the society
Allotment letter from the society in the borrower’s name
Copy of the lease deed, if executed
Certificate of registration of the society
Copy of the byelaws of the society
No Objection Certificate from the society
7/12 extract or property register card in the society's name
Copy of N.A permission for the land from the Collector
Search and title report (with the details of documents) for the last 30 years
Copy of order under the Urban Land Ceiling Act
Copy of building plans sanctioned by the competent authority
Commencement certificate granted by Corporation / Nagar Palika
Latest receipts of taxes paid
Original agreement to assign / deed of assignment.

If constructing on own land

Original sale deed of land and extract of Index II.
12 extract or property register card in your name.
Copy of N.A. permission for land from the collector.
Search and title report (with the details of documents) for the last 30 years.
Copy of order under Urban Land Ceiling Act.
Copy of the building plans sanctioned by the competent authority.
Building permission granted by Corporation / Nagar Palika.
The latest receipts of taxes paid.
Estimate of cost of construction certified by the architect. 

 Document Checklist

General Questions

What is an EMI?
Ans.: An EMI, equated monthly installment, is the amount of money to be paid to the bank or venture capitalist on a monthly basis. It consists of the principal amount and the interest of said amount, equally divided by the number of months in the loan tenure. The EMI is paid on a fixed date of the month till the full amount has been repaid. Calculating your EMI in beforehead can help you plan your budget, as you will understand exactly how much money you have to pay every month.
 
What are the different types of interest available?
 Ans.: Fixed interest rate : A fixed interest rate on a mortgage or loan stays at the predetermined outlay for the entire term of the loan. This allows borrowers to plan their further payments. Usually personal loans and credit cards have fixed interest rates.

Floating interest rate : A floating interest rate fluctuates with the market or along mutually an index. Floating rates are usually offered for home loans; the prime lending or the base rate is used as a basis for calculating the floating rate and the interest rate charged is the prime interest rate/base plus a certain spread (as charged by the credit institution). 
 
What are the interest rates offered for home loans? What are: Daily Reducing, Monthly Reducing and Yearly Reducing?
Ans.: Interest rates are different from institution to institution and generally range from about 8.75% to around 12 %. The interest on home loans in India is usually calculated either on monthly reducing or yearly reducing balance. In some cases, daily reducing basis is also adopted.

Annual reducing: In this system, the principal, for which you pay interest, reduces at the end of the year. Thus you continue to pay interest on a certain portion of the principal which you have actually paid back to the lender. This means the EMI for the monthly reducing system is effectively less than the annual reducing system.

Monthly reducing: In this system, the principal, for which you pay interest, reduces every month as you pay your EMI.

Daily Reducing: In this system, the principal, for which you pay interest, reduces from the day you pay your EMI. EMI in the daily reducing system is less than the monthly reducing system. 

What do lenders look for ?
Ans.: Lenders check  personal details such as smooth credit antiquity, annual and monthly earning, current EMIs of the consumer, a clean title to the house/ property and the location of the house before approving a home loan application.