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Buying your first house on a loan comes with multiple tax benefits. These deductions not only reduce your tax outgo but also help in managing your cash flows better.

Here are all the deductions you can claim when you take a home loan:

1) Deduction on interest: If you are paying EMIs for a home loan you took to buy a house, the interest component in the EMI can be claimed as deduction. You must be both an owner and a co-borrower (in the loan) to claim tax benefits. This deduction can be claimed starting the year in which the construction of the house is completed. Suppose the construction of your house was completed on August 30, 2014, you can claim deduction for interest for the entire 12 months in financial year 2014-15. So every year a maximum of Rs.s 2 lakh can be claimed for a house that you use for your own residence. If your house is rented, the entire interest for the year can be claimed as deduction.

The interest payments for the year shall result in a loss under the head 'income from house property'. This loss can be adjusted against in the same year against other heads of income in your income tax return including salary. Therefore, it reduces your total taxable income and the tax you pay thereon. Assuming your interest outgo for financial year 2014-15 for a house you use for your own residence is Rss. 1.8 lakh, income under the head salary is Rss. 8.5 lakh, income from other sources (interest income) is Rs.s 52,000 and your loss from house property is Rss. 1.8 lakh.

In such a case, your total taxable income will be Rs.s 8,50,000 + Rs.s 52,000 - Rs.s 1,80,000 = Rs.s 7.22 lakh.

2) Deduction on principal repayment: The component of your EMI which goes towards principal is eligible to be claimed under Section 80C of the Income Tax Act. You can sum up the outgo for the year towards principal and claim it. A maximum of Rss. 1.5 lakh can be claimed as deduction under Section 80C.

3) Deduction on stamp duty and registration charges: Besides the deduction allowed on principal repayment, payment made towards stamp duty and registration charges are also allowed to be claimed under Section 80C. However, these can only be claimed in the year in which these were paid.

4) Deduction on pre-construction interest: While deduction for interest can be claimed starting the financial year in which the construction is completed, you can also start claiming pre-construction interest from the same year. You need to add up the entire pre-construction interest and claim it in five equal installments. The total deduction, however, should not exceed Rss. 2 lakh when the house is being used by you for your own residence.

5) Deduction under Section 80EE: This section has been inserted to provide tax benefit to first time home owners where value of the house is Rss. 40 lakh or less and the amount of loan taken is Rss. 25 lakh or less. To be able to claim this deduction, the loan should have been sanctioned between April 1, 2013 to March 31, 2014. A maximum deduction of Rs.s 1 lakh is available under this section and can be claimed in financial years 2013-14 and 2014-15 spread over these two years or in any one year. The total deduction allowed under Section 80EE cannot exceed Rss. 1 lakh. This section lapses in the current financial year 2015-16. So, if you meet all the conditions laid out in Section 80EE, do remember to claim the deduction while filing your tax returns for financial year 2014-15.

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Sometimes we end up taking loans at higher rates of interest because of which making the monthly EMI payments tend to become a huge burden. For this purpose, a balance transfer of your personal loan can be done.

What is a Balance Transfer?

In Balance Transfer, the entire unpaid loan amount is transferred to another bank which is offering a lower interest rate. In simple terms, now you just have to pay your EMIs to the bank you've transferred your loan to, at the new (and lower) interest rate.

How will it help you?

Reduced interest rates: A balance transfer provides the benefit of reduced interest rates. The new bank will generally offer you a low interest rate than the original bank, thus decreasing your EMI amount and total interest liability. To claim the maximum benefits of a Balance Transfer, opt for a Balance Transfer during the initial period of your loan tenure.
Longer tenure: While switching to a new bank, you can re-negotiate the loan terms with the new bank and ask them to extend the repayment tenure. This allows you pay lower EMIs over a longer period of time.
Improved Credit Score: If you had regularly paid your past EMIs completely and on time, but foresee that it will be difficult for you to make complete payments for the next few months because of some unexpected financial constraints, it is wise for you to consider transferring your personal loan. This will increase your credit repayment cycle and also help in maintaining your high Credit Score.

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We would like to bring in your kind attention 3 most important aspect of Personal loan and its legal implications in India

1. No.......because loan is not an income , unless you can prove the identity ,genuineness and credit worthiness of the person who has given you Personal loan.
As per section 68 of the Income Tax Act , if the aforesaid things are not proved, the income tax authority may add the amount of loan as your income .

2. If you receive loan in cash exceeding Rs 20000 , there is a provision of penalty u/s 271D in the Income Tax Act .
Similarly , if you repay loan in excess of Rs 20000 in a year in Cash , there will be equal amount of penalty u/s 271E of the Income Tax Act.

3. If you are having shareholding in a private limited company , and that company advances you loan when it has accumulated profit in its balance sheet, the amount of loan may be treated as taxable dividend also popularly known as "Deemed Dividend" Section 2(22)(e) Archives

So , while the loan is not an income , one should be careful about it.

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You can reset the Higher rates banks charge old home loan customers

Just like bank depositors, those borrowing from banks also need to be alert in order to protect themselves against unnecessary charges. Here are the most common areas where banks tend to overcharge customers.

If you compare the interest costs of your friends and relatives on bank loans-housing, auto, personal loan, etc. you will realise that they vary drastically. And these costs not only vary across banks, but across customers of the same bank-and not because of varying customer credit scores. Some banks have been offering Loans at cheaper rates to new customers, while charging old customers a higher rate. "Banks continue to follow the discriminatory practice of offering differential rates for existing and new customers and this should stop." saya Ramganesh Iyer, co-founder, Fisdom.

As the banking regulator, the Reserve Bank of India (RBI) should stop this discriminatory practice, which it is partly responsible for creating. The RBI introduced the MCLR (marginal cost based lending rate) method, effective April 2016, to enable a faster transmission of rate cuts to bank customers, replacing the base rate method that was being used by banks to set their lending rates—earlier the base rate had replaced the less transparent prime lending rate (PLR). Now, borrowers who took loans at cheaper rates, based on MCLR, old customers are still paying higher rates.

“Since banks offer different rates, it is better to visit some common aggregator and understand the lowest rates available in the market. This will help you bargain better with your bank,” says Dipak Samanta, CEO, iServeFinancial.
To reduce your interest outgo, you need to shift your loan from base rate or PLR to MCLR. Shifting to MCLR now is a good move, say experts. “Though RBI’s stand is neutral now, rates may not go up from current levels. In fact, they may come down later—after an year,” says Balwant Jain, investment expert. Bear in mind though, in an upward moving interest rate regime, MCLR will move up faster than base rates, just like it falls faster in a reducing interest rate regime.

Loan reset charges

There are two types of loans: Fixed and floating rate. Floating rate loans are supposed to mirror the rise and fall in interest rates set by the RBI. But this rarely happens. While banks increase rates immediately, they are very slow in cutting them. The introduction of new benchmarks has also turned out to banks’ advantage. They charge customers for shifting from one benchmark to another— from PLR regime to base rate regime to MCLR regime now. The charges are levied to meet the expenses involved in drafting and registering new agreements—stamp duty, registration charges, etc. Though these expenses vary across states, ordinarily they won’t be more than 0.2% of the outstanding amount. However, some banks try to profit from this also by charging around 0.5%.

Should you go for a reset even if it involves a small charge? Yes. The amount you save will be significantly higher over the years. To illustrate, consider the case of a home loan borrower with Rs 50 lakh outstanding loan amount and a 15-year tenure. A 1% fall in interest— from 9.5% to 8.5%—will bring his EMI from down from Rs 52,200 to Rs 49,250, a reduction of Rs 2,950 per month. A total saving of Rs 5.31 lakh—significantly higher than the reset fee of Rs 25,000 even at the maximum rate of 0.5%. You may be able to get this reset cost down by negotiating with your bank. A threat of shifting to another bank often works. “Another way is to approach the branch manager. Based on the value of your relationship, they can reduce or even waive charges,” says Samanta. The ‘value of relationship’ here is crucial. If you have multiple relationships with the bank—savings bank account, credit card, other loans, investment, etc.—you have a valuable relationship and will receive a favourable treatment.

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Balance Transfer(BT) is a facility where in you transfer the balance outstanding on a loan or credit card to another bank at a lower interest rate. If used judiciously, it provides great savings. But the hard fact is that very few avail of it as not many are aware of the benefits.

Ideally doing BT during the initial stages of your repayment tenure is much more beneficial as you can take advantage of the lower interest rate for a longer period. Also individuals with bad credit ( low CIBIL scores) can save more by opting for BT once their CIBIL scores have improved. For e.g.: if you took a personal loan at 20% interest rate a year back and your CIBIL score has improved during this period, you may qualify for a BT at 14%; which is a cool 6% lower.

Some banks charge a foreclosure fee as a % of your outstanding principal balance, if you pre-pay your loan. The BT might entail some processing fee too. So this is an additional cost that you may incur while availing BT. So understand the exact cost of the BT and the total amount you will end up repaying; compare this against the total amount you will pay if you continue with the same loan.

The following are the typical steps in a Balance Transfer. Each lender's actual steps might vary depending upon their internal processes.

#1 Seek a foreclosure letter, statement of account and list of property documents from your current home finance company
  #2 Compare and choose a home finance company
  #3 Loan application, income and identity documents to be submitted to the new home finance company
  #4 Credit appraisal by the new lender, including field investigation and loan sanction
  #5 Offer letter from new lender
  #6 Submission of legal documents and legal check
  #7 Technical and valuation check of the property
  #8 Signing of agreements and submission of post-dated cheques to new lender
  #9 Disbursement of loan favoring old lender

Here are some tips to help you while opting for Balance Transfer.

#1. Calculate whether it still makes economic sense to refinance; considering the fees and charges you might be forced to pay.

#2. Confirm with the new lender that the low rate is not a teaser rate that will be contractually raised after say 6 months or pre-determined minimum period. Read the fine print.

#3. Ensure that your paperwork is in order for the new lender, especially the property ownership papers, otherwise the disbursement can get delayed.

can home loan interest be deducted on taxes?

can Personal loan be transferred to another bank?

Are personal loans Taxable ?

Lower Your home loan EMI

You can reset the Higher rates banks charge old home loan customers

Personal Loans Ready to fund your Dreams

When to do Balance Transfer

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