Meghna dreamt of owning a house ever since she moved to a different city with a new job. A large chunk of her salary was spent paying the monthly house rent. She, therefore, decided to park her money in something that would eventually be her own and also generate appreciation in terms of property value. She also realised that buying a house was a very significant investment, which would not be possible with her savings. Instead, she could just spend a certain percentage from her pocket as a down payment and take a home loan for the remaining amount. She could then pay back the loan amount (both the principal and the interest levied on the sum) in the form of Equated Monthly Instalments (EMI).
She could even track her loan repayment status via a provisional home loan interest certificate. Read on to know more about provisional home loan certificates.
What is a provisional home loan certificate?
A housing loan provisional certificate is an official document that keeps a home loan borrower updated on their home loan status. The document also helps them claim tax concessions applicable on home loans. It is an official report of a housing loan account. When someone (borrower) opts for a home loan, the bank (lender) sends them an official statement that includes all details about the loan at the beginning of each year. The home loan provisional certificate includes information such as:
- Borrower’s personal details
- Home loan account number
- Actual loan amount (principal and interest amount)
- Start and end dates
- Interest rate
- Interest type (fixed or floating)
- The amount already repaid
- Information on missed repayments, if any
- Details of changes on the principal amount on account of missed repayment
- Information on part-repayment
- Due or expected repayment for the current year
How’s a housing loan provisional certificate useful?
Broadly speaking, a provisional home loan certificate helps borrowers keep a tab on their finances. It could be helpful in various ways, such as:
- It helps keep a tab on the borrower’s yearly finances.
- Gives the home loan borrower a clear idea of their monetary situation and how they can plan their upcoming expenditures. It also helps in long-term financial planning.
- Helps keep track of all the borrower’s repayments, the total amount already paid and the balance amount.
- Clarifies the advantages of loan prepayment.
- Serves as proof of investment, which the borrower can use to claim an income tax deduction.
What tax benefits can a borrower enjoy if they produce a home loan provisional certificate?
Under Section 80C and 24 of Income Tax Act India, 1961, home loan borrowers must submit the home loan provisional interest certificate to claim tax benefits on both the principal loan amount and the interest component. Section 24 grants borrowers an income tax deduction of up to Rs. 2 lakhs on the interest paid on their home loan in a particular year. Again, Section 80C allows a tax deduction of up to Rs.1.5 lakhs on the principal loan amount, provided the owner/borrower hasn’t sold the property within the first five years of possession. A borrower must collect the home loan provisional certificate from the lending bank. They can either download it from their bank’s website (if such a provision is available) or collect a hard copy of the certificate by visiting the bank.
Getting a home loan is a practical investment decision. Income tax benefits on housing loans have made investing in property an attractive option. Various banks and non-banking financial institutions, like Tata Capital, offer home loans at competitive interest rates.
- In the case of a joint home loan, can both the borrowers use the same provisional home loan interest certificate to claim a tax deduction?
Yes, in the case of a joint home loan, both the borrowers can use the same provisional home loan interest certificate to claim tax benefits.
- Are the certificates available online or offline?
It is now possible to access the home loan provisional interest certificate online. The borrower must have a net banking facility in the home loan account to get online access. However, a borrower can also visit the bank and obtain a hard copy of the certificate.
- What is a moratorium period? Is it mentioned in the provisional certificate of the housing loan?
The loan moratorium is the waiting period before the borrower starts to repay the loan. Yes, it is mentioned in the provisional certificate of the housing loan.