What are the tax benefits that are available to a home loan applicant?

Deduction of interest on housing loan:
In the case of self-occupied property acquired or constructed out of borrowed funds, the deduction available for interest on capital borrowed is Rs. 1,50,000/-. In case of a rented property, the whole of the interest amount is allowed as deduction. The interest on borrowed funds in pre-construction period is allowed over a 5-year period commencing from the previous year in which the house is acquired or constructed.

Limit of repayment of housing loan (principal):
The limit of repayment of housing loan qualifying for deduction u/s 80C is Rs. 1,00,000/- (including Stamp Duty, Registration Fee incurred for the purpose of transfer of such residential house property). Is there any relief from tax arising on transfer of long-term capital assets under the Income Tax Act, 1961?

Long term capital gains on sale of property used for residence:
Section 54 of the Income Tax Act provides relief to an individual or Hindu Undivided Family from capital gains arising from transfer of a residential house held by the assessee at least for a period of 36 months. Such capital gains to the extent utilised for purchase (within 1 year before or 2 years after the date of sale) or construction (within 3 years of date of sale) of a residential house is exempt u/s 54. If the amount of capital gains is proposed to be utilised, but is not so utilised up to the due date for filing of return then, the amount of unutilised capital gain is required to be deposited in the "Capital Gains Account Scheme, 1988".

Capital gains on transfer of capital assets other than a residential house:
Section 54F of the Income Tax Act exempts long term capital gains arising from transfer of any long term capital asset other than a residential house. Such capital gains to the extent utilised for purchase (within 1 year before or 2 years after the date of sale) or construction (within 3 years of date of sale) of a residential house is exempt u/s 54F. To be entitled to this exemption the assesse should not own more than one residential house other than the house sold as on the date of transfer. The provisions of depositing the unutilised capital gain in the "Capital Gains Account Scheme, 1988" as explained above is also applicable.

Capital gains not to be charged on investment in specified assets:
Section 54EC of the Income Tax Act provides relief from capital gains arising from transfer of any capital asset on or after 1st April 2000 shall be exempt to the extent such capital gain is invested within a period of 6 months after the date of such transfer in the long term specified asset provided such specified asset is not transferred or converted into money within a period of 3 years from the date of its acquisition. However, the investment made on or after 1st April 2007 in the long term specified asset by assessee during any financial year cannot exceed Rs. 50 lakh. For claiming this exemption, the capital gains have to be invested (investment not to exceed Rs. 50 lakh) within 6 months of the date of transfer in notified bonds issued by:

• National Highways Authority of India (NHAI)
• Rural Electrification Corporation Ltd. (REC)

What are the types of housing loans available?

Various varieties of housing loans are offered by different financial institutions. Prominent among these are:

• Home Loans

This is the basic housing loan for the purchase of a new home, which covers the cost of the flat, deposits and charges, stamp duty and registration charges.

• Home Improvement / Extension Loans

These are for the purpose of undertaking repair works and renovations in a home that is already owned by you.

• Bridge Loans

Bridge loans are for people who wish to sell their existing house and purchase another one and need finance for the new house until a buyer is found for the old one.

• Balance Transfer

A balance transfer indicates the paying off of an existing housing loan and availing of a loan with a lower rate of interest.

• Refinance Loans

Refinance loans are taken to pay off the debt incurred from private sources such as relatives and friends, for the purchase of your present house.

Who can apply for a housing loan?

Any Indian citizen, including Non Resident Indians, with a steady source of income can borrow funds for financing the cost of a flat from housing finance companies and banks. Non Resident Indian can also avail housing loans depending upon the policy of the bank.

What are other aspects of HOME LOANS?

• Generally Bank funds between 75%-80% of the cost of the flat only. Bank Interest rates vary from time to time and from institution to institution.
• The interest is calculated either on a daily or monthly reducing or yearly reducing balances. Generally customers prefer floating rate of interest upon fixed rate.
• Repayment period options range generally from 5 to 20 years. Some of the banks may give loans up to 25 years also.
• The flat purchased is the primary security and is mortgaged to the lending institution till the entire loan is repaid. Additional security such as life insurance policies, shares, bonds, fixed deposit receipts, national savings certificates can also be offered, as per the requirements of the institution.
• Many lending companies require 1 guarantor or a co-applicant
• Usually loans are disbursed within 10 - 15 days after completion of verification by the institution, documentation (original agreement for sale / lodging receipt) and completion of all relevant procedures. Submission of proof that the borrower's own contribution has been paid by him to the vendor / builder / developer is also an important aspect.

What are the documents required at the time of applying for a housing loan?

The standard list of documents required of all loan applicants is as follows:

• Photographs
• Proof of age
• Identity papers
• Proof of residence

For salaried individuals:

• Latest salary slip
• Last 2 years form 16 or equivalent
• Bank statements reflecting salary credits for the previous six months

For self-employed individuals:

• Certified copies of balance sheet
• Profit and loss statement
• Tax challans / tax returns for the previous 3 years

For partnership/private limited companies:

• The Articles of Association
• Partnership deed and details about the firm

Who is an NRI?

A person residing outside India who is a citizen of India or a person outside India who is of Indian origin is an NRI. The definition of Person resident outside India is defined under section 2(w) of Foreign Exchange Management Act, 1999 as "a person who is not resident in India"

A person shall be deemed to be a person not resident in India in the following cases:-

• When the person stays in India for less than or up to 182 days during the preceding financial year
• When a person who has gone out of India or who stays outside India, in either case - for or on taking up employment outside India, or

• for carrying on outside India a business or vocation outside India, or
• for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period

Who is a PIO?

The definition of 'Person of Indian Origin' is defined under section 2 (b) of Foreign Exchange Management (borrowing and lending in rupees) Regulations, 2000 and under section 2 (xii) of Foreign Exchange Management (Deposit) Regulations, 2000 as given under:-
"Person of Indian Origin" means a citizen of any country other than Bangladesh or Pakistan, if

• he at any time held an Indian passport; or
• he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or
• the person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b)

Person of Indian Origin (PIO) for the purpose of acquiring immovable property in India as given under:-
"Person of Indian origin" means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who

• at any time, held an Indian passport; or
• who or either of whose father or mother or whose grandfather or grandmother was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955)"
• Do non-resident Indian citizens require RBI's permission to acquire residential/commercial property in India?
• NRI / PIO / Foreign National who is a person resident in India (citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of the Reserve Bank) may acquire immovable property in India other than agricultural land/ plantation property or a farm house out of repatriable and / or non-repatriable funds.

In what manner should the purchase consideration for the residential immovable property be paid by foreign citizens of Indian origin under the general permission?
The payment of purchase price, if any, should be made out of

• funds received in India through normal banking channels by way of inward remittance from any place outside India or
• funds held in any non-resident account maintained in accordance with the provisions of the Act and the regulations made by the Reserve Bank.

Note: No payment of purchase price for acquisition of immovable property shall be made either by traveller's cheque or by foreign currency notes or by any other mode other than those specifically permitted as above.
Can foreign citizens of Indian origin acquire or dispose of residential property by way of gift / inheritance?

• An NRI may acquire any immovable property in India other than agricultural land / farm house plantation property, by way of gift from a person resident in India or from a person resident outside India who is a citizen of India or from a person of Indian origin resident outside India
• An NRI may acquire any immovable property in India by way of inheritance from a person resident outside India who had acquired such property in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations or from a person resident in India
• An NRI may transfer any immovable property in India to a person resident in India.
• An NRI may transfer any immovable property other than agricultural or plantation property or farm house to a person resident outside India who is a citizen of India or to a person of Indian origin resident outside India.

In respect of such investments, NRIs are eligible to repatriate:

• The sale proceeds of immovable property in India if the property was acquired out of foreign exchange sources i.e. remitted through normal banking channels / by debit to NRE / FCNR (B) account.
• The amount to be repatriated should not exceed the amount paid for the property in foreign exchange received through normal banking channel or by debit to NRE account (foreign currency equivalent, as on the date of payment) or debit to FCNR (B) account.

Can they dispose of such properties and can sale proceeds of such property be remitted out of India?

• In the event of sale of immovable property, other than agricultural land / farm house / plantation property in India, by a person resident outside India who is a citizen of India / PIO, the repatriation of sale proceeds is restricted to not more than two residential properties subject to certain conditions.
• If the property was acquired out of Rupee sources, NRI or PIO may remit an amount of up to USD one million per financial year out of the balances held in the NRO account (inclusive of sale proceeds of assets acquired by way of inheritance or settlement), for all the bonafide purposes to the satisfaction of the Authorized Dealer bank and subject to tax compliance.
• Refund of
  
  • application / earnest money / purchase consideration made by house-building agencies/seller on account of non-allotment of flats / plots and
  • cancellation of booking/deals for purchase of residential/commercial properties, together with interest, net of taxes, provided original payment is made out of NRE/FCNR (B) account/inward remittances.
• Can authorised dealers grant housing loan to NRI's where he is a principal borrower with his resident close relative as a co-applicant / guarantor or where the land is owned jointly by such NRI borrower with his resident close relative?
• Yes. Such housing loans availed in rupees can also be repaid by the close relatives in India of the borrower. For further information please visit the FAQ Section of http://www.rbi.org.in
• Can housing loan of NRI / PIOs be repaid by close relatives of the borrower in India?
• Housing Loan in rupees availed of by NRIs/ PIOs from ADs / Housing Financial Institutions in India can be repaid by the close relatives in India of the borrower.

For NRIs

• Latest salary certificate specifying, name (as it appears in the passport)
• Date of joining
• Passport number
• Designation
• Perquisites and salary
• Photocopy of labour card/identity card
• Photocopy of valid resident visa stamped on the passport
• Photocopy of monthly statement of local bank account
• Property related documents

What is the extent of application of the Bombay Stamp Act, 1958?

• The Act applies to the whole of the State of Maharashtra.

What is an "instrument" under the Act?

• An "instrument" includes every document by which any right or liability is or purports to be created, transferred, limited, extended, extinguished or recorded, but does not include a Bill of Exchange, cheque, Promissory Note, Bill of Lading, Letter of Credit, Policy of Insurance, Transfer of Share, debenture, proxy and receipt.

What is market value?

• Market value in relation to any property which is the subject matter of an instrument means the price which such property would have fetched if sold in the open market on the date of execution of such instrument or the consideration mentioned in the instrument, whichever is higher. The price which such property would have fetched, if sold in the open market, is determined on the basis of the Ready Reckoner issued each year. Depreciation in stamp duty is available for old buildings and building without lift.

When is stamp duty payable on an instrument in Maharashtra?

• All instruments are liable to be stamped before or at the time of execution of instrument or immediately thereafter on the next working day following the date of execution, when executed in the State of Maharashtra. Any instrument executed outside the state is liable to duty only on receipt of such instrument in the state, provided it relates to a property situated in the state, or a matter or thing to be done in the state. Stamp duty is not levied on a transaction, but on an instrument.

What is the rate at which stamp duty is payable?

• Stamp duty is payable at the rate mentioned in the Bombay Stamp Act, 1958 and as amended from time to time.

Which documents are required to be compulsorily registered?

• Documents listed in Section 17 of the Indian Registration Act, 1908 are to be registered compulsorily. Registration of documents listed in Section 18 of the Indian Registration Act, 1908 is optional. An agreement for leave and licence is required to be compulsorily registered under the Maharashtra Rent Control Act, 1999.

Is there a time limit within which documents should be registered?

• Yes. Documents must be registered within 4 months of the date of execution. Thereafter, documents can be registered within the next 4 months on payment of penalty.

Who is required to pay stamp duty and registration fee on purchase or lease of a flat or office?

• A purchaser (whether on first sale from a developer or on resale of a flat) or a lessee of a flat or office is required to pay stamp duty and registration fee.

How is stamp duty paid in Maharashtra?

• Stamp duty above the value of Rs. 25,000 is payable by a pay order / demand draft / cheque drawn in favour of "The Superintendent of Stamps, Mumbai". Alternatively, a pay order can be drawn in favour of "The Reserve Bank of India - a/c Stamp Duty, Mumbai". The original instrument is then franked with the value of the stamp duty. Adhesive stamps are no longer used in Mumbai city. Stamp Duty up to the value of Rs. 25,000 can be paid in cash. A receipt is issued by the concerned office for the stamp duty amount.

What is the procedure for registration of an instrument?

• Once adequate stamp duty is affixed on an instrument and it is dated, signed by the parties and attested (where required) by witnesses, it can be lodged for registration after payment of the registration fee. All parties signing the instrument are required to attend the office of the concerned Sub Registrar of Assurances either by themselves or through their constituted attorney under a power of attorney to admit execution of the instrument. A passport size photograph, original power of attorney, personal identification such as passport or income tax PAN Card, adequate photo copies of the original instrument are some of the essentials required for registration. After lodging an instrument, it is registered and a seal of the Sub Registrar is affixed on the instrument, thereafter the original instrument is returned to the parties.

Is there a restriction on the name in which stamp paper must be purchased?

• Yes. The stamp paper should be purchased in the name of one of the parties who would be signing the instrument.

Is there a time frame within which the stamp paper must be used?

• Yes. Stamp paper should be used within 6 months from date of purchase. Stamp papers not used within this period are invalid

Is there a penalty for not paying the requisite stamp duty?

• Yes. Previously, the penalty was an amount not exceeding 10 times the amount of the proper duty. As per the recent amendments, a penalty of 2% per month on the proper duty for the period of default will be levied, subject to a maximum of 2 times the deficient portion of duty. Instruments are liable to be impounded till proper stamp duty is paid.

What are the consequences for not paying stamp duty on an instrument?

• In case proper stamp duty is not paid on an instrument, the instrument is inadmissible as evidence.

Is it possible to get a refund of stamp duty already paid on an instrument?

• Yes. If stamp duty is paid on an instrument but the instrument is not signed by any party then an application is to be made within 6 months of the date of purchase of the stamp paper, to the concerned authorities for refund of stamp duty. The original stamp paper is returned along with the application. On receipt of such application, the concerned authorities are empowered to refund the value of stamp duty after deducting such amounts as may be prescribed.

Is stamp duty payable on a gift or resale of a flat?

• Yes. Stamp duty is payable on instrument of gift or resale of a flat.

When can an instrument be impounded?

• When an instrument is presented for registration and the concerned authorities have reasons to believe that an instrument does not reflect the true market value and they can take steps for recovery of the stamp duty including impounding of instruments. If the collector determines that the proper stamp duty has not been paid then penalty can be levied on such instruments.

Is there a procedure for adjudication of stamp duty?

• A person can seek the opinion of the Collector of Stamps by making an application to him for adjudication of stamp duty payable by such person on the instrument. For this purpose, the person who is a party to the instrument has to furnish a true copy of the instrument and an affidavit stating the facts and such other evidences as required, along with prescribed fee. The Collector's opinion is final and conclusive. No appeal lies against his order of adjudication.

Can a person grant a power of attorney for signing and registering instrument?

• Yes. Persons residing abroad or those who travel frequently are advised to grant power of attorneys to facilitate better management of their flats.

Can a person grant a power of attorney for registering instruments?

• Yes, but his power of attorney must be registered before the Sub Registrar of Assurances.
• Stamp duty in the state of Maharashtra
• Stamp duty is payable on market value or agreement value, whichever is higher. The rates of stamp duty for residential / shop / office / industrial gala varies from 5.5% to 6% of the market value of the property or agreement value, whichever is higher. The above amount does not include registration fee, which is 1% of the market value or agreement value, whichever is higher, subject to a maximum of Rs. 30,000 (effective 1-4-2003).

What are Statutory Payments?

Please click on the links below to view Statutory Payments:
Notice of Motion No. 100 of 2011 in Writ Petition No. 1456 of 2010 (Service Tax)
Interim order of the Honourable Bombay High Court on Service Tax
MVAT is applicable on all residential apartments sold after 1st April, 2010 at the rate of 1% of the Market Value of the property or Agreement Value, whichever is higher.
Service tax for Bundled Services (construction service + preference location) provided @ 3.09% of Agreement Value (conditions apply).
Service tax on Society Charges @ 12.36% (conditions apply).