Home loans: The good and the bad
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Success
Failure
The idea of owning a house at a low interest rate is so pleasant that most people see no reason not to avail of a home loan. These loans fulfil dreams, especially of young couples, since they allow people to own a house quickly. However, almost nothing in life comes without cons. Therefore, here are a few of the pros and cons surrounding home loans that will enhance your understanding of this financial instrument:
Pros
Summary of tax benefits on principal and interest paid is as below:
First Home -Self Occupied
Actual principal repaid subject to a maximum of Rs. 1,50,000 (Rs. 2 lakh for senior citizens) can be claimed as investment eligible for tax deduction under section 80C.
First Home – Rented/ Vacant (deemed to be let out property)
Upto Rs. 1,50,000 (Rs. 2 lakh for senior citizens) eligible for tax deduction under Section 80 C. The deduction is available only if the property owner is staying in a different city for work.
Exemption on interest is capped at lower of two, a) Rs. 2,00,000 or b) actual interest paid for all properties owned by a tax payer.
Second Home or Additional Property
None
Exemption on interest is capped at lower of two, a) Rs. 2,00,000 or b) actual interest paid for all properties owned by a tax payer
Under Construction Property
None
The interest paid can be claimed in equal parts in five financial years post completion or handing over of property within the overall annual limit of Rs. 2 lakh.
Cons
These are a few of the positives and negatives of home loans. Think about them carefully before you avail of a home loan. This will help you to remain profitable.
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