The housing loan has two advantages; first and foremost, it gives the opportunity to acquire a house, and secondly, it also gives you attractive tax benefits over the period of term of the loan. Here are few tips for housing loan:

1. In normal banking parlance, an individual is eligible for housing loan to the extent of 50 per cent of the monthly take away. Suppose, your monthly take away or the amount you bring in home is Rs. 50,000, then banks would normally give you loan having monthly installment of not more than Rs. 25,000 i.e. typically 50 per cent of the in-hand salary;

2. A home loan brings in tax benefit. You get deductions for the principal and interest you pay during the year. However what really noteworthy is that the interest deduction is limited to Rs. 150,000. So, accordingly for a loan of Rs. 16,00,000 you pay an EMI of Rs. 17,194 that comes to Rs. 2,06,328 yearly, constituting Rs. 1,57,817 as interest and balance as principal repayment. This can be considered an ideal situation where the one takes the full advantage of the upper limit of the tax relief.

3. The housing loan can also be taken jointly, this will maximize the tax benefits, as the above tax benefits limits gets doubled and therefore the loan can be planned accordingly.

4. Further, the financial institutions typically finances 80 to 85 per cent of the cost of the property and the rest is required to be paid by you as your part of cost. Typically, whenever, you will ask the financial institutions for disbursements, they would first ask you to pay your proportionate share, thus it is advisable to secure atleast 20 per cent of the cost of the new house before applying for the housing loan.

5. It is advisable that the home loan should be insured. Insurance bears the risk of non-payment in case of death of the borrower within the loan tenure, and assures that the descendants will never be without a home. Generally the bank includes the insurance premium in your EMI for the said reasons.

We at Taxmantra.com have the expertise in handling complicated individual taxation issues. Do contact us immediately; we are here to help in solving all your tax issues.