I am working with an automobile company in Pune. I want to know when repayment of a home loan begins?

In the case of a home loan which is fully disbursed during the month, repayment of the loan is facilitated through EMI (equated monthly instalment) payments starting on the first of the following month.

The customer has to pay only pre-EMI interest for the period between the date of final disbursement of the loan and the first of the next month. However, if the customer receives the full disbursement on the first of the month, his EMI begins in that month itself.

By contrast, in case of a property under construction , where payments have to be made in stages, customers can opt for payment of pre-EMI interest (i.e. interest only) on the loan amount disbursed till the loan is disbursed fully. After that, his EMI would begin on the first of the following month. Alternatively, the customer could opt for HDFC’s Tranche Based EMI facility, which enables the customer to repay even a partly disbursed loan through EMIs (i.e. principal plusinterest).

I took my first home loan from HDFC in September 2004 and have been living in the same flat. I have been claiming tax benefit on the first home loan. Recently I shifted to a company accommodation and let out the first property. Now, I am planning to purchase a second flat, again taking a loan from HDFC, and shall put the property on rent immediately because the flat is a ready for possession. I have already booked the property, which is in the approved list of HDFC.

I have the following queries:

a)Since I am not in my own flat i.e. no more in the ‘self occupied’ category, will I continue to get income-tax benefits?

b)Can I get any income-tax benefit for the second home loan?

You can claim tax benefits on loans for both your properties, assuming that your second property has also been let out, as there is no limit to the number of properties you can claim tax benefits for if they are let out.

As per the Income-Tax Act, 1961, for rented out properties, you can set off the entire interest payment in excess of net rental income (rent income less standard deduction and municipal taxes) received on the rented houses against your income. In addition, you can also claim tax benefit under section 80C on repayment of the principal amount. However, it will be part of the overall 80C benefits. We recommend that you consult your tax adviser.

Renu Sud Karnad is joint managing director, HDFC.

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