Q: Are any conditions required to be fulfilled if repatriation of sale proceeds is desired?

Ans: Applications for repatriation of sale proceeds are considered provided the sale takes place after three years from the date of final purchase deed or from the date of payment of final instalment of consideration amount, whichever is later.

Q: Can sale proceeds of such property if and when sold be remitted out of India?

Ans: In respect of residential properties purchased on or after 26th May 1993, Reserve Bank considers applications for repatriation of sale proceeds up to the consideration amount remitted in foreign exchange for the acquisition of the property for two such properties. The balance amount of sale proceeds if any or sale proceeds in respect of properties purchased prior to 26th May 1993, will have to be credited to the ordinary non-resident rupee account of the owner of the property.

Q: Can such property be sold without the permission of Reserve Bank?

Ans: Reserve Bank has granted general permission for sale of such property. However, where the property is purchased by another foreign citizen of Indian origin, funds towards the purchase consideration should either be remitted to India or paid out of balances in NRE/FCNR accounts.

Q: Are there any formalities required to be completed by foreign citizens of Indian origin for purchasing residential immovable property in India under the general permission?

Ans:They are required to file a declaration in form IPI 7 with the Central Office of Reserve Bank at Mumbai within a period of 90 days from the date of purchase of immovable property or final payment of purchase consideration alongwith a certified copy of the document evidencing the transaction and bank certificate regarding the consideration paid.

Q: In what manner the purchase consideration for the residential immovable property should be paid by foreign citizens of Indian origin under the general permission?

Ans:The purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from NRE / FCNR accounts maintained with banks in India

Home Loans

Q: When will the loan be disbursed?

Ans: Your loan will be disbursed on:

  • 1 Your identification and selection of the property.
  • 2 Submission of the legal documents.
  • 3 Legal and technical clearance of the property
  • 4 Investment of your contribution towards the property

Q: When can I apply for a loan?

Ans: You can apply for a home loan even before you have selected your property. The loan amount would be sanctioned or approved for you, based on your repayment capability.

Q: What is an Annual Reducing balance?

Ans: An Equated Monthly Installment (EMI) has 2 components, interest and principal. When the interest is calculated on annual rests, the principal reduces only at the end of the year. Therefore, you continue to pay interest on a portion of the principal that you have already actually paid back to the lending company.

Q: What are the various types of loans available?

Ans: 1. Home Loans

  • 2. Land Loans
  • 3. Home Equity Loans
  • 4. Office Premises Loans
    All of these are available on an adjustable rate or a fixed rate.

Q: What are the stages involved in taking a loan?

Ans: There are two main stages:

  • 1. Sanction of the loan, whereby you get an approval for a specific loan amount based on the value of your property and repayment capabilities.
  • 2. Disbursement of the loan amount.

Q: What security/collateral do I have to provide?

Ans: Typically the security for the loan is a first mortgage of the property to be financed, by way of deposit of title deeds and/or such other collateral security as may be necessary. The title to the property should be clear, marketable and free from any encumbrances.

Q: Is a personal guarantor a must?

Ans: No, there is no personal guarantor required in most cases.

Q: Who can be the co-applicants for the loan?

Ans: You could include your spouse as a co-applicant for the loan and we shall include his/her income to enhance your loan amount. Further, in case there are any other co-owners they also need to be co-applicants.

Q: How much time will it take for my loan to be approved?

Ans: It takes a week for your loan to be sanctioned after you have submitted all the documents.

Q: How is the interest charged/calculated?

Ans: There are two schemes,

  • 1. Fixed Rate Home Loans
  • 2. Adjustable Rate Home Loans.

If you opt for an Adjustable Rate Home Loan, the interest rate would vary with the Bank Home Floating Reference Rate. Under the Fixed Rate Home Loans the rate applicable on the date of disbursement remains fixed during the entire duration of the loan.

Q: What are the loan tenure options?

Ans: You have the option of selecting a term you are comfortable with, ranging upto 20 years, provided the term does not extend beyond your reaching 65 years of age or retirement age, whichever is earlier.

Q: What is the minimum loan amount?

Ans: You can get a home loan starting from Rs. 2 lakh (Delhi, Mumbai & Bangalore Rs. 3 Lakhs). The loan amount depends on your repayment capability and is restricted to a maximum of 85% of the cost of the property or the cost of construction as applicable. Repayment capacity takes into consideration factors such as income, age, qualifications, number of dependants, spouse's income, assets, liabilities, stability, continuity of occupation and savings history.

Tax Benefits

Q: Benefits of taking a home loan for Section 88 of the Income Tax Act

Ans: You get a 20% rebate on repayment of principal during a financial year. Once again, over the years, the principal repayment eligible for rebate has been enhanced from Rs 10,000 to the current limit of Rs 20,000. Stamp duty, registration fee or other such expenses paid for the purpose of transfer of such house property to the assessee is also considered under this amount.

Going back to our earlier example:

  • 1. Taxable income of Rs 4 lakh
  • 2. Taxable income stands reduced to Rs 2.5 lakh
  • 3. Tax before rebate and surcharge: Rs 49,000 (no surcharge is computed as surcharge is applicable on tax payable after allowing for rebate under Section 88)
  • 4. Rebate of Rs 4,000 (20% of Rs 20,000 being principal repayment)
  • 5. Tax less rebate of Rs 4,000 + surcharge @ 2%= Rs 45,900
  • 6. Tax saved = Rs 49,900 (Rs 45,900 as shown above plus rebate of Rs 4,000)

Q: Benefits of taking a home loan for Section 24 of the Income Tax Act

Ans: Interest paid on capital borrowed for the acquisition, construction, repair, renewal or reconstruction of property is entitled to a deduction. That means you are allowed to deduct an amount equivalent to the total interest payable on the housing loan from your taxable income within the same financial year.

This is now a substantial amount. It started off with the Income Tax Department offering Rs 15,000 as the maximum amount eligible for deduction in the case of self-occupied property. This later got doubled to Rs 30,000. It did not stop there. After getting enhanced to Rs 75,000, it was then taken to a limit of Rs 1 lakh. Presently, the limit stands elevated to Rs 1.5 lakh.

So, should you borrow money to acquire, construct, repair, renew or reconstruct property on or after April 1, 1999, you get a deduction of up to Rs 1.5 lakh. The criteria being: the property has to be acquired or constructed by March 31, 2003 and be self-occupied.

When put in figures, this is quite an amount:

  • 1. Assume taxable income of Rs 4 lakh, placing the assessee in the highest tax bracket.
  • 2. Assume interest payment during the first financial year is Rs 1.60 lakh
  • 3. Taxable income stands reduced to Rs 2.5 lakh (Rs 4 lakh - Rs 1.5 lakh being the maximum limit)
  • 4. Total tax amounts to Rs 49,980 (tax of Rs 49,000 + surcharge of Rs 980)
  • 5. Tax saved is Rs 45,900 (tax @30% on Rs 1.5 lakh plus 2% surcharge as the investor is in the highest tax bracket)

Stamp Duty

Q: What is Registration of Property Documents?

Ans: Registration is the process of recording a copy of a document, transferring the title in immovable property to the office of the Registrar. Registration acts as proof that a transaction has taken place. The registration of a document serves as a notice of the transaction, to the persons affected by the transaction. Registration also serves as an implied notice to any person subsequently acquiring interest in the property, covered by the registered document. When a document, which is compulsorily to be registered, is not registered, it fails to confer any title given by the document.

The real purpose of registration is to ensure that every person dealing with property for which compulsory registration is required, can confidently rely on the statement contained in the register, as being a full and complete account of all transactions by which the title may be affected. A certificate of Registration is mere evidence that a document has been registered. It is not proof that it has been executed. When the execution of a document is directly in dispute between two parties, the fact that the document is registered is not sufficient to prove its genuineness. Registration does not automatically dispense with the necessity of independent proof that the document was executed.

Registration is done after the parties execute the document. The agreement should be registered with the Sub-Registrar of Assurance under the provisions of the Indian Registration Act, 1908 within four months from the date of execution of the document. However, if due to any unavoidable circumstances, the document is not registered within the time limit, then the document can be registered only on making an application to the Sub-Registrar of Assurance within a further period not exceeding four months and on payment of appropriate fine.

Q: Is registration compulsory for all types of transfer of immovable properties?

Ans: Except in case of transfer of shares of a co-operative housing society and housing limited company where registration is optional, virtually in all cases of transfer of immovable property like family arrangement, agreement to sell, conveyance, gift deed, lease deed (above one year), leave and license agreement, tenancy agreement, declaration deed, power of attorney to sell for consideration etc. has to be registered compulsorily under Indian Registration Act,1908 otherwise the proper legal title will not pass on to the purchaser/transferee i.e. the title will be defective if registration is not done.

Q: In what languages should the document be written so that it can be registered in Mumbai?

Ans: It should be normally be written is English, Hindi, Marathi and Gujarati only.

Q: What are the papers/requirements at the time of registration of documents?

Ans: A document should be fully stamped as per the Stamp Duty Ready Reckoner so as to confirm that proper stamp duty has been paid. The Stamp Duty Ready Reckoner is a public document and is available for inspection at a sub- registrar's office.

For registering documents relating to property, one should go the respective registration office along with the original document and one photocopy. The document must be printed or typed on one side only and in black colour. A photocopy should be taken on only one side of the paper and the paper should be of 90 GSM thickness. There should be butter paper between the two sheets of the photocopy.

Apart from a properly executed and fully stamped duty paid document which is to be registered, the following documents are also required before the registration procedure is started.

  • 1. No Objection Certificate under the Urban Land Ceiling Act if the area of land transferred exceeds 500 sq. mts. in Mumbai City.
  • 2. If the land belongs to a government or semi- government body or to a charitable trust the no objection certificate of such government or semi- government body or to a charitable trust.
  • 3. Property Card of the land on which the property is being registered is situated. This requirement is irrespective of whether land is sold or the building is being sold or any other part of the building is being sold and also irrespective of whether the seller of the property is recorded as the owner on the property card or not. In other words, even the flat owners are expected to produce this paper at the time of registration.
  • 4. If property sold/purchased is in the old building and the benefit of depreciation is claimed on the market value, then any one of the following documents is to be produced as a proof of old construction:
  • i. Municipal assessment bill of the building OR
  • ii. Building Completion Certificate OR
  • iii. Original registered agreement between the builder and original purchaser of that flat or of any other flat in that building
  • iv. Original registered agreement between the builder and original purchaser of that flat or of any flat in that building.
  • 5. It is better to get the document adjudicated in case the building is very old and proper depreciation is not given by the sub-registrar.
  • i. Original Stamp Duty payment receipt
  • ii. One should go along with along with two witnesses
  • iii. Registration fees and computer service charges is to be paid in cash to sub-registrar at the time of registration

Q: How does one get the document registered at the sub-registrar's office?

Ans: 1. Bring the complete document along with other documents above.

  • 2. Submit the document along with input form at the token window and get the token number.
  • 3. Wait till the token number is announced.
  • 4. On token number being announced, all parties to the document must present themselves before the sub-registrar to admit execution of the document, photographed, thumb impression and signature taken on additional sheet of paper in presence of sub-registrar.
  • 5. Pay the required registration fees and computer service charges in cash as per the receipt (Computer service charges are @ Rs.20 per page)
  • 6. The document will be returned within 30 minutes of getting the receipt
  • 7. Please deal only with Officers and staff of the Registration Department who always display government identity card with Government Seal.

Q: If any person who has executed the document is unable to come to sub- registrar?s office on medical grounds, then what should he do?

Ans: In case a person is unable to attend the office of the sub-registrar on medical grounds, then he should apply to the sub-registrar through a duly authorized representative stating the fact. The sub-registrar is bound to visit such person after office hours i.e. morning 9.00 a.m. to 10.00 a.m. and in the evening 5.00pm to 6.00 pm. That person shall admit in execution in presence of that sub- registrar, affix his photograph and sign and put his thumb impression on the document. The sub-registrar will take the document with him and complete all the formalities and process of registration.

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