Hi Srikant,
All your articles are extremely helping the public, and getting to know the do's and dont's in various financial areas.
We have taken 40L home loan, me and my wife both are working and opted as co-borowers and co-owners, equal share. As per the rule we can get the tax exception of 3.5 L each and total of 7L We have taken the loan amount 40L for 9.6% interest for 2 yrs flat rate and there after floating.
currently we have opted to pay only the interest amount for the respective released amount to the builder. The possession is April 2017.
When we calculate the payment schedule http://emicalculator.net/ assuming the EMI will start on April 2017. We get to see the Total amount as per schedule is 4.5L(69K Principal + 3.8L Interest amount) will be paid is 2017-18 FY and so on yearly.
So me and wife can show only 4.5L + 1/5 of interest paid till 2017 Jan if we pay only EMI with out any extra payment.
Question:1. The interest amount is totally tax expect for the 2017-18 for both me and my wife as we are landing up paying extra interest amount than required as per schedule. (1.1) As we see a shortage for Principal exception of approx 2.3L - Can we pay 2.3L as prepayment loan amount assuming that will to go to Principal payment? Please Suggest
2. Some of my friends were suggesting to pay the EMI as per schedule - so that it will be helpful in tax exceptions in long run - What would you suggest? Is it better to pay as per EMI or pay as per solution(1.1) or any other better way of saving money and investing in other areas?
Regards, Shiva
1 Answers
Dear Shiva,
Thank you for your appreciation and kind words.
When was your home loan sanctioned? Are you going to self-occupy the property or going to let it out?
If you are going to get the possession in April 2017 then FY 2016-17, can be considered as Prior Period or under-construction period. As rightly pointed out by you, you can claim the interest paid in this duration in 5 equal installments from FY 2017-18.
Kindly note that do not start your investment plan with TAX PLANNING. Think beyond taxes when investing.
Assuming your home loan rate of interest is around 10% for the next 5 to 10 years, you have very high possibility of making more than 10% by investing the amount in other equity oriented products instead of part payment.
I am sure you will agree with me that you may have certain other high priority goals like Retirement, kid's education (assuming you have) etc.,
One needs to invest as early as possible, as frequently as possible and as much as possible for a goal like retirement, considering high inflation rate that is prevailing in a fast developing country like ours.
Also, suggest you to have adequate life insurance & health insurance coverage (if you are under-insured).
Kindly go through below articles and you may revert to me if you have more queries;
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