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Business News/ Money / Personal Finance/  Is a retired employee eligible for a home renovation loan?

Is a retired employee eligible for a home renovation loan?

Retired govt employees can avail home loans for renovation & additional floor; factors include approved plans & estimates from contractor. Inheritance property's sale profit subject to capital gains tax.


I am a 55-year-old retired government employee who wants to renovate my house, build another floor and lease it out for an additional source of income. Am I eligible for a home loan or should I make partial withdrawal from my provident fund (PF)?

—Name withheld on request

Many lenders provide home loans for renovation and the addition of another floor. Here are some factors that will determine the eligibility for a loan: The renovation plans have to be approved by respective authorities; the additional construction should be for residential purposes; and an architect’s plan and estimate from a civil contractor have to be in place.

There are various loan options available for pensionerss, offering interest rates at par with any other salaried borrower and extended repayment periods, keeping your current age in mind.

You should ideally look at a public sector bank for meeting your home loan requirement. They could ask for your spouse/children to be co-applicants for your loan.

Another factor to keep in mind is the maximum outgo from your pension, allowing for your normal household expenses to be left unhindered. Usually, the lender also has a certain proportion that can be allowed from your pension towards the loan repayment. It would be prudent to not take the proposed rent into your monthly loan repayment calculations . Once the rentals are received, you can start making part-payments or increase your EMI amount, which would help in bringing the overall tenure and interest outflow down.

What are the tax implications for selling a property that I had inherited from my grandparent in 2022. I am a homemaker with no other sources of income.

—Name withheld on request

When a property is received by way of inheritance or as a gift, it is not taxable for the receiver. However, if this is subsequently sold, the profit will be subject to capital gains tax . In such a case, the categorisation of capital gains (short term or long term) for taxation purposes will depend on the duration for which the property was held by your grandparent and later by you. A marginal tax rate is applicable on short term capital gains whereas a flat tax rate of 20% is applicable on long term capital gains. The difference between the sale price and the cost price of the property will be the capital gains on the sale of the property.

• Cost of the Property: The property did not cost anything to the inheritor, but for calculation of capital gain the cost to the previous owner is considered as the cost of acquisition. Expenses, if any incurred by the inheritor on the improvement of the property will be added to the cost.

• For LTCG, the cost of the property will be subject to Indexation. In the case of inherited property, the year of acquisition of the previous owner is considered for indexation of the cost of acquisition.

• For an Indian resident, the capital Ggins will be eligible for the basic exemption limits of income tax. However, no deduction under sections 80C to 80U is allowed on LTCG.

Amit Bhachawat is the CFO, India Mortgage Guarantee Corporation

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Published: 20 Apr 2023, 11:46 PM IST
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