The current Budget has extended the same tax benefits for one more year.

You can save significant part of your tax liability if you have taken a home loan. Here's how it works:

Interest paid on the home loan
As per Sec 24(b) of the Income Tax Act, 1961 a deduction up to Rs. 150,000 towards the total interest payable on the home loan towards purchase / construction of house property can be claimed while computing the income from house property. (The deduction stands reduced to Rs 30,000 in case of loans taken prior to March 1, 1999). The interest payable for the pre-acquisition or pre-construction period would be deductible in five equal annual installments commencing from the year in which the house has been acquired or constructed.

Please remember that in case of self occupied property, this deduction is allowed only for one such self - occupied property. The interest towards home loan taken for purchase, construction, repairs, renewal or reconstruction of house property is eligible for deduction under section 24(b).

Principal repayment of the home loan
As per the newly introduced Sections 80C read with section 80CCE of the Income Tax Act, 1961 the principal repayment up to Rs. 100,000 on your home loan will be allowed as a deduction from the gross total income subject to fulfillment of prescribed conditions. Let us consider a hypothetical example.

Your taxable Income: Rs 5,50,000

Principal repayment for the same year: Rs 1,10,000 and Interest payable for the year : Rs 1,60,000

Total Deductions allowed: Rs 2,50,000 (Rs 1,50,000 towards interest payable & Rs 1,00,000 for principal repayment of the loan)

Thus, your taxable income will reduce to Rs 3,00,000 ( Rs 5,50,000 - Rs 2,50,000 ).

Use the Tax Savings Tool (on the left) to ascertain the proper tenure of the loan you must take to minimise your post tax cost of the loan. If you have already taken a loan, it could be useful to refinance the same today at a lower interest rate and a higher tenure using the Refinance Tool.

Normally the lenders will ask you to create a registered mortgage deed on the property which they will retain with them as a security against your loan. As this is a legal document, the prevalent stamp duty needs to be paid to the State Govt. In the state of Maharastra, this duty is about Rs. 5000 for a loan below Rs 5 lacs and about Rs. 35000 for a loan above Rs 20 lacs. Some lenders like HDFC do not ask for the Registered Mortgage Deed but only take the original Title Papers of the property as a security. Thus customers of HDFC do not pay the stamp duty to the respective State Governments.

Some States have taken this matter to court as they are losing revenue. Some of the lower courts have ruled in favour of the State Governments and asked HDFC to make good the Stamp Duty for all past customers along with interest. The matter is now pending with the Supreme Court. We feel that the ruling will again go in favour of the States. We are not sure if HDFC would be asked to pay up a large amount along with interest, which may ultimately be passed on the the existing customers. Any new customers going to such lenders must be aware of the risk of a legal ruling that may result in a future cash payment along with interest.

If you are a salaried employee, banks look at your current salaries while deciding how much they can lend you. The fact is that your salary can only increase as time goes by and your ability to repay larger loan amounts will only get better. Some banks now offer a flexible repayment plan that allows you to pay larger portions of the loan in the later years. Your initial monthly payments are kept low. IDBI Bank, HSBC and Citibank offer Flexi repayment option loans. To read more about this click below.

Flexi repayment loans are now available

One can deposit and withdraw your money (salary and other income) whenever you need, without any charges

Interest is calculated on daily balance and applied monthly.

Refinance your loan:  Transfer your existing high interest loan to a lower interest Standard Chartered Bank home loan (as per the applicable current rates) and save on interest. We will also finance the prepayment charges if you so wish.

Citibank gives home loans upto 80% of the property value. Flexibility to pay interest only during construction period also no penalty for partial prepayments.

Citibank offers a flexi-savings account to reduce your cost of borrowing. The bank will automatically open a Saving Account from which you can give standing instructions to deduct the EMI payments for the loan. You can then prepay the loan at any point in time and be given instant credit for the same, in case you get a large lump-sum annual bonus from your employer. Should you require money in an emergency at any point you can avail of a over draft on this savings account at an interest rate that is the same as that on your Home loan. This works out much cheaper than taking an over draft on a normal savings account

FREE TRIPLE  PROTECTION PLAN in the form of  Loss job of customer, Personal accident life cover and Property cover against natural calamities

There is a discounted start-up fee for Government employees. The Administrating fees stand reduced from 0.7% to 0.5% only.

Free triple insurance - property cover, earthquake cover and personal accident cover. given free along with the loan ( not available for the Floating rate loan)

You can prepay the entire loan in any year without any prepayment penalty. Each prepayment has to be atleast 10% of the outstanding loan. Howvere, the floating rate loan has a 1% prepayment penalty.

ICICI also launches a variable rate loan with a monthly rest basis versus the regular fixed rate loan that is on an annual rest basis

No guarantors are required for loans upto 20 years in most cases

No pre payment fees for any part payment as long as the loan is not fully retired, else 2% charge on pre paid amount. You can repay upto 33% of the outstanding loan in any year without paying penalty.

Free personal accident insurance

Sanction approval without having selected a property

Special 100% funding for select properties

Higher eligibility for self-employed professionals through segment-specific schemes

Prepayment is 2% if the entire loan is pre paid else it is 0%. Avoid this penalty by prepaying upto 99% of your loan if need be.

Home Loan (Fixed) :
 
Fixed Home Loan interest rate for 3 years 12.25% & 5 years 12.50%.

Reverse Mortgage Loan(Floating):
 
Fixed (re-phasement after every 5 years ) interest rate 12.25%

Special Home Loan with a Life Insurance ::
 
You can avail of a special insurance cover on your IDBI home loan for a small premium. For most of us, buying a house is an important milestone in our lives. IDBI Bank, understand your concerns. Home Loans are now accompanied by a specially-designed insurance cover. So even if calamity strikes, your family needn't worry about the loan.