To help readers keep pace with what’s happening in the real estate sector, Mint’s Q&A will appear every other Monday.
I had taken a loan from a bank wherein there was insurance attached to it. I am not very happy with the services offered by the bank. Now I am planning to transfer my loan account to some other bank, which provides me a decent after-sales service. When my loan is taken over by another bank, what will be the status of my insurance, since I have paid a single premium for the entire insurance cover for my home loan?
In case of a balance transfer whereby you would be transferring your existing loan to another housing finance company/bank, the insurance policy attached to
your existing loan will continue to be in force depending upon the terms of agreement between your bank and the insurance company.
Renu Sud Karnad
Some home loan companies already have this arrangement in place. For instance, as per our arrangement with HDFC Standard Life, even if you were to transfer the existing loan, which has an insurance policy built around it, the policy will continue to be in force. However, the policy will have to be reassigned in favour of the new lender so that in the event of death, it ensures that your outstanding loan, up to the amount insured, is adjusted/repaid to the new lender.
I am an allottee of Greater Noida BHS scheme and have taken a loan of around Rs11 lakh from HDFC Bank. My company is now refusing to give the rebate on interest paid because the house is under construction. My company’s accounts department said that tax exemption on my loan is only applicable to the principal repayment and not for interest because the house is under construction. I have already given them the tax certificate, which shows the interest and principal amount paid, but does not mention whether the house is under possession or not.
One can claim tax benefits only after having taken possession of the house.
Once your house is constructed and you take possession of it, you can claim tax benefits, but only for the interest paid during the pre-possession stage. You will not be able to claim any tax benefit on the principal amount repaid till the date of possession.
As per the Income-tax Act, one is allowed to claim tax rebate up to 20% on the interest paid during the pre-possession stage in the year you take possession and the balance 80% can be claimed over the next four years to the extent of 20% each year, subject to a cap of Rs1.5 lakh per year in the case of a self-occupied property.
However, as stated earlier, you can start claiming the benefit on interest only after taking possession of the property and the following four years. It is recommended that you consult your tax adviser.
Renu Sud Karnad is joint managing director, HDFC.
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