Ask Mint | Maintain the required balance against the cheques you issue

Ask Mint | Maintain the required balance against the cheques you issue

I have been paying monthly instalments on my home loan through post-dated cheques. The branch manager once forwarded one month’s cheque for clearance a little late, while the following month’s cheque was also forwarded for clearance at the scheduled date. This resulted in one cheque bouncing due to insufficient funds in my bank account. Will I be considered a defaulter now? Will my name appear in the Credit Information Bureau (India) Ltd (Cibil) list and affect me while applying for any loan in the future?

One must always keep in mind that if you have issued a cheque towards any payment then you need to maintain the required balance. The bank may have delayed the presentation of the cheque, but you cannot be excused for not maintaining the balance. You will also have to pay any other cost such as a cheque bounce charges, etc.

Before I answer your specific query, let me tell you a little bit about Cibil. Cibil helps lenders in making fast and objective lending decisions by providing them with credit information/credit history and repayment track record of the loan seeker.

The credit history reflects all banking transactions of the individual wherein details relating to all credit facilities availed including defaults, amount overdue and others are shown. This information is available only to financial institutions/banks that are the members of Cibil.

The records are updated by Cibil on a regular basis. Therefore, it is extremely essential that one is careful with his/her repayments and as far as possible avoid cases of defaults/late payments/cheque bounces.

In your case, assuming that you have now paid, the bank will generally provide your updated details to Cibil and the due updation in your credit history will be carried out in the records by Cibil.

I am getting my house constructed. I have obtained a loan of 5 lakh for the construction from my bank, out of which 8 lakh has been disbursed in instalments. I had plans to get the ground floor and the first floor constructed. However, with my son getting a new employment and deciding to settle abroad, I have shelved the plans to get the first floor fully constructed as of now. Now, with another 2 lakh, the construction would be complete. I am planning to request the bank to stop the disbursal after this installment and start the EMI. I wish to know how that would affect my income tax benefit on the home loan as I have not taken the full disbursement. I am already paying interest on the amount disbursed to me till date.

You could make an application to your lender for lowering your loan amount and start your EMI. This will not affect your tax benefit claim in any way.

However, please note that since it is an under construction property, you can claim tax benefit on interest payment only once the house is ready and you get the completion certificate from the local authorities.

In case of a self-occupied property, you can claim tax benefit on 20% of the interest paid during the construction stage in the year you receive the completion certificate, and the balance 80% can be claimed over the next four years to the extent of 20% each year, subject to an overall cap of Rs1.5 lakh per year under Section 24 of the Income Tax Act 1961. You are advised to consult your tax expert.

Renu Sud Karnad is joint managing director, HDFC.

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