I had taken a home loan of Rs 50 lakh about 10 years back to buy a 2BHK apartment in Mumbai suburb. I continue to pay the EMIs for this home loan. This property is on my name. I am getting a good deal to buy second flat with 3BHK apartment in same area and I am interested to book this property with second home loan of Rs 30 lakh on my spouse name. She is working as a partner in my business. Please tell me what are the tax advantages we are eligible for if book another property.– Madan Vellanki, Mumbai
There is no limit on the number of residential properties you can have on which tax advantage can be taken by you. For tax purpose, you and your wife are separate entities and the tax limits given later are individually available to each one of you for your actual contributions made to the EMI amount of the loan. The tax advantages come to you primarily from the principal and interest part of the home loan that you take. And these advantages only accrue once the house possession has been taken.
The principal part of home loan qualifies for deduction under Section 80C, where all your other common deductions like life insurance, PPF, ELSS, tuition fee etc are also available, and is subject to a maximum of Rs 1.5 lakh as of now. The interest part is governed by Section 24. If the house is your self-occupied house, the deduction available is limited to Rs 2 lakh a year to each one of you. Please remember that only one of the houses can be a self-occupied house and this is allowed to be changed from one financial year to the other too. If the house is not self-occupied, its rent (or notional rent as per fair rental value) is added to your income while there is no limit on the interest amount on which the tax rebate can be taken.
I will retire from private company after 10 years from now. My concern is how do I estimate my pension needs to maintain current standard of living after retirement?– Rajesh Nath, Ahmedabad
It is a simple calculation that needs to be done by you, preferably using Excel sheet, if you’re conversant with the same. Alternately, your financial advisor can do the same for you. You can also go to one of the numerous financial websites where such online calculators are readily available. Essentially, you have to estimate the amount of money you would require with you in bulk when you retire so that the same can be used to give you a monthly pension. The first step is to assess how much are you spending today and what part of it would not be there after you’ve retired, like children expenses, most of the EMIs of loans, reduced car expenses etc. Generally, 80% of your current monthly expenses could be a good estimate if you’re not able to estimate it otherwise. Assume that your expenses would rise at an inflation rate of about 8% per annum throughout your life and you may take the life expectancy to be 85 years. Taking these figures, you can estimate how much money would you require for living comfortably for 25 years if you were to retire at 60 years of age. As an example, taking the above parameters, your current monthly expenses to be Rs 60,000, return on your investments after retirement to be 8% on the conservative side and that you have saved nothing for the purpose as on date, you would require approximately Rs 2.95 crore in your hand at the time of retirement to maintain the same standard of living.
Just a few months back, I completely paid off my home loan. However, despite paying off all the dues the bank hasn’t returned the original papers of the property as it says the documents have gone missing. Please tell me what I should do?– Gururaj, Kerala
It is a very unfortunate event when such an incident takes place. However, please be absolutely sure in your mind that it is the bank which has to do all the running around and bear all the expenses involved with it. In a similar case in November 2012, New Delhi District Consumer Forum directed IDBI Bank to pay Rs 3.50 lakh as compensation to a home loan borrower for losing the title deeds of his flat. The forum also ordered IDBI Bank to issue a certificate stating that it had received various documents pertaining to the borrower’s flat but had lost the same later. Further, it directed IDBI Bank to get the lost documents reissued, duly certified by the DDA and the cooperative group housing society, and to take all necessary steps to safeguard the borrower’s interests.
Exact steps in brief that should be taken by you are as follows. Register a written complaint with the bank regarding lost documents and take its acknowledgement from the bank official with bank seal. Then register a police FIR against the bank where you should clearly state that the bank has lost your original documents which you submitted with the bank in original against home loan from bank. A copy of this FIR be submitted with the bank and its acknowledgement taken from them. If the property involved is a flat in a cooperative society, you should submit a court affidavit to Registrar of Co-operative Societies mentioning that your original property documents have been lost by the bank. This step is required to avoid any fraud. The bank should now put a public notice in two newspapers (One English newspaper and other in vernacular language of the state) mentioning that the original property documents have been lost by the bank with your property details in the notice. The bank will issue indemnity bond attested and notarised by a government notary to you on stamp paper stating that original documents have been lost by the bank. Request for duplicate share certificate from society by submitting police FIR copy. Now the bank will obtain certified/ duplicate copies from the registrar’s office. The bank will then submit police FIR, duplicate share certificate from housing society, the newspaper advertisements and the undertaking at the deputy registrar’s office. The bank will pay the required charges. The registrar will then issue the duplicate copy of the sale deed. Once this process is completed, request for the latest encumbrance certificate from registrar’s office to ensure that everything is fine.
In case the bank refuses to do any of these or unnecessarily delays it, you may file a complaint in the consumer forum and claim compensation from the bank for service deficiency. You can demand compensation equivalent to double the value of your property, depending on the nature of the loss. In such cases, decision is always in favour of the customer. Besides compensation, bank is also liable to pay a penalty of Rs 100 per day if there is delay in providing documents beyond 15 days from date of loan closure. This is over and above the compensation for deficiency in service.
National Pension Scheme
I want to invest in National Pension Scheme (NPS). It’s in limelight after the Union Budget 2015-16 announced additional benefit of Rs 50,000 beyond Section 80/C for tax saving purpose. Please advice is it prudent to invest in NPS? – Aruna Iyer, Hyderabad
NPS is one of the best retirement savings instrument. If you’ve been attracted by the additional Rs 50,000 beyond 80C tax saving, it will be good to know that there are two more tax savings available in NPS. Rs 1.5 Lakh under Income Tax Section 80C is one. Secondly, a further deduction is available under Sec 80CCD(2), ie, if your employer puts up to 10% of your basic salary in the NPS, that amount will be eligible for tax deduction to you.
There are many factors which compel you to go for NPS. It is a product specifically made for retirement saving, which is closely regulated and monitored by a government agency, PFRDA. There are eight fund managers (ICICI, HDFC, LIC, Kotak, Birla, Reliance, UTI and SBI) who are competing for your money, thus ensuring good returns since you have the flexibility to shift between fund managers based on performance. Fund management charges are very low. There are in-built checks to ensure you cannot take out money easily at your whims and fancies, thus ensuring you get the power of compounding.