Sir,
I have a PPF ac since SEP 1996 (21ST YEAR). The int works out to approx 8.5%
I have a home loan @ 9.55%
I am likely to get some 7CPC arrears.
I have option of investing in PPF or reducing the outstanding home loan. Which is better ?
As per my calculations
a) both give tax benefit under 80cc
b) PPF gives 8.5% int.
c) Reducing home loan will save 9.55 % BUT I will lose IT rebate @ 20.6 % on the home loan int so saved. Effectively reducing the benefit to approx 7.6 %.
Is my understanding and calculation correct.?
3 Answers
Hi,
May I know your other important Financial goals or obligations (if any)?
How did you get 7.6%?
No financial burden.
As for 7.6% it is as under:-
The target amt is Rs 1 lack.
The house in question is rented.
Int paid on Rs 1L is Rs 9550/-
But this amt is reduced from my income from house property, thereby saving IT at 20.6% (my bracket) i. e. Rs 1967 . So my real saving by pre paying home loan is 9550-1967 = Rs 7583/- (7.6% of 1 L)
In short, If I do not pre pay home loan, I pay Rs 9550 as int but recover Rs 1967 as rebate in IT by way of reduction of income from house property by Rs 9550.
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