Paid a home loan prepayment fee? You can get income tax benefit

If you are someone who paid foreclosure fee or prepayment charges, on your home loan, you have reasons to rejoice. According to a report published in the Times of India today, now home loan prepayment fee is eligible for tax benefits. Read whole story here.

A Mumbai bench of the Income Tax Appellate Tribunal ruled out that taxpayers who have prepayment or foreclosure charges on early repayment of their housing loans, will get some tax benefits.

[caption id=“attachment_787707” align=“alignleft” width=“380”] A Mumbai bench of the Income Tax Appellate Tribunal ruled out that taxpayers who have prepayment or foreclosure charges on early repayment of their housing loans, will get some tax benefits[/caption]

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Simply put, you can now claim the amount you paid as a deduction under the head income from house property and could set it off against other heads of income, such as salary income. This means you will be able to save some amount tax money.

The story also quoted Sonu Iyer, tax partner, Ernst & Young, who said, ““This ruling will help those who had paid prepayment charges during FY 2012-13. This payment will be deductible from income from house property. As a next step in the tax computation, salaried employees can claim a set-off against their salary income while filing their returns, the due date for which is July 31,”

So, while filing your returns you need to keep this notification in mind. Also, on June 5 last year the Reserve Bank of India had done way with foreclosure and prepayment penalty on floating rates home loans. But, lenders are permitted to charge a foreclosure /prepayment fee on fixed rate home loans. A move like this will help those who have pending assessment of earlier years.

We suggest you get in touch with your Chartered Accountant to know more details on the same. Income tax isn’t as easy subject to understand and to make the most of this latest development, be intentional while filing your returns.