New Income tax Rules On Home Loan

The government has changed income tax rules that could increase the tax outgo of those who have taken a home loan for a property that has been rented out. The amount that could be set off on home loans for rented property has been reduced. Earlier, in the case of rented property, the loss of house property – which is basically the interest paid on home loan minus rental income – was allowed to be adjusted from income without any limit. This helped significantly reduce tax liability. Now the limit that can set off against the loss of rented house property has been restricted to Rs. 2 lakh per annum. This came into effect on April 1, 2017 (the assessment year 2018-19).

However, on rented properties, the interest paid above Rs. 2 lakh can be carried forward for eight assessment years. Since the interest component of home loan repaid in initial years is higher, experts say that the borrower may not be able to fully adjust the interest paid as a deduction even in subsequent years.

For example, your interest outgo on a second property is Rs. 5 lakh in a particular year. Assume that you are earning a rent of Rs. 1.5 lakh annually from the property. Such buyers, as per the current rules, are allowed to adjust the difference of Rs. 3.5 lakh (Rs. 5 lakh interest minus Rs. 1.5 lakh). But from the next financial year, they will be allowed deduction of just Rs. 2 lakh. The remaining amount of Rs. 1.5 lakh (Rs. 3.5 lakh minus Rs. 2 lakh) can be carried forward up to eight financial years and be adjusted later.

Tax experts say that some high net worth individuals – who used to buy properties on loan and were able to set off the full interest liability against the lettable value of property and thus bring down their tax liability substantially – would be particularly hit by this new tax rule.

Note: Income tax rules say that those who own more than one property can only treat one of them as self-occupied and the rest have to be assumed to be rented. Income tax has to be paid on notional rent.

From April another tax rule related to the properties will also change. The new tax rule will help bring down tax liability from the property sale. The holding period of a property for qualifying under long-term gains will get reduced to two years, from three years currently. As per current tax norms, if a property is sold within three years of buying, the profit from the transaction is treated as short-term capital gain and is taxed according to the slab rate applicable to him/her. So reducing this time period to two years will bring down tax liability.

Thus, after two years, the transaction will be able to qualify for long-term capital gains, thus lower taxes. Under long-term capital gains on immovable properties, the profit is taxed at 20 per after indexation. Under indexation, inflation during the holding period is taken into account and thus the purchase price is adjusted, reducing the tax burden on the property seller. There are also other benefits for the seller under the long-term capital gains tax. If the gains are invested in some select government investment schemes, the tax liability goes down significantly.

Choosing the Best Neighbourhood for your new Home

The place where we live and the people with whom we share our life are the beginning and the core of our humanity. It’s how we learn to trust and value others, cherishing the spaces and values we share. A great part of the successful move is finding a good neighbourhood. Choosing the right neighbourhood for you and your family is just as important as choosing the right home. When buying a new home, remember that you are not just buying a home- you are also joining in and becoming a part of a neighbourhood. Not all neighbourhoods are created equal. Not all neighbourhoods are going to be a truly perfect fit for everyone and their individual needs. There are many things that should be considered when purchasing a home, especially if you are moving to an area that you don’t know well. Before buying a property evaluate the aspects of a prospective neighbourhood.

Make a list of your needs and wants

Think about what kind of atmosphere you are looking for. Do you prefer a community in the centre of the city or a quiet neighbourhood in the countryside or town? How important is it to have top schools in the area? Do you plan to drive or get public transportation to work? Are there shopping centres, restaurants, cinemas or parks nearby?

Find out whether it is suitable for your lifestyle

Have a walk in your prospective neighbourhood streets. You will get the best information about the neighbourhood from the people who live there. Do your own research by talking to the neighbours. Ask them if they like the area, what problems they have in the place. Ask them questions that concern you. Ask them about the advantages and disadvantages of the neighbourhood. They can tell you things you’d never find out online. Walk the markets, shopping centres, restaurants, parks and all the other amenities that your neighbourhood has to offer you. If you like an active life it should be important for you that there are cinemas, theatres, and bars. Such entertainment could be the only thing that makes your neighbourhood alive. If possible, try to visit different days and times. Find out if the streets are clean if the homes and yards are in a good condition if there are many people who live there, whether it is a quiet neighbourhood or not. Imagine yourself living there. Once you feel comfortable with the area, you can feel more at peace about the home buying decision. In some neighbourhoods, neighbours even don’t know each other’s names. In others, block parties make regular occurrences. Spending time in the target neighbourhood you can find out if the place is suitable for you and our family.

Education system

Public and private schools, kindergarten through high school, and even preschools can greatly affect the value of a home. A good school should be a priority on anyone’s list having children. You should look at the quality of the school system of the neighbourhood you are considering. If you have children or plan to have them, you will naturally want them to have access to the best education possible.

Transportation issues in the neighbourhood

Transportation is a non- separable part of any society. It exhibits a very close relation to the style of life, the range, and location and the goods and services which will be available for consumption. Finding a home in a neighbourhood that has convenient access to public transport is important but people sometimes forget to consider this as a crucial factor. When choosing a neighbourhood, find out how close it is to the nearest bus line, how long it takes to get to work, school and other regular destinations, how heavy the traffic is during the day. Basically, the farther you live from the bus line, subway or other means of transportation, the more important it gets to be very close and have easy access to the main junctions and routes. You can get anywhere you want in little time if you are near a train or bus.

Crime statistics

Crime statistics of the neighbourhood make one of the most important factors when considering buying a home. Nothing is more important than the security and safety of your family. Many people worry about crime rates when they move into a new place. When driving through the neighbourhood watch for the signs of vandalism. You can do a quick Google search for some information about the crime statistics in the neighbourhood you want. The best way to find out detailed information about the neighbourhood crime statistics it’s to contact the local police department with all your questions.

Affordability

The location is the factor that will definitely play a large role in calculating the property value. Each neighbourhood has its own set of property values. This is an important aspect to look into for the location you consider. Compare the cost of living in our current neighbourhood to that of the new one.

You need to make sure the neighbourhood has the access to the things you like to do. The amenities a neighbourhood offers greatly depend on the neighbourhood’s location. Think about what amenities you can and can’t live without. Think about amenities you would like to have nearby like grocery stores, coffee shops, pools, health and fitness centres, shopping malls.