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All you need to know about the home loan provisional certificate

All you need to know about the home loan provisional certificate

Meghna had 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 realized 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 Installments (EMI).

She could even track her loan repayment status via a provisional home loan interest certificate. Read on to know more about home loan provisional certificates. 

What is a home loan provisional certificate?

A home 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 to 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 to the principal amount on account of missed repayment
  • Information on part-repayment
  • Due or expected repayment for the current year

Benefits of a home loan provisional certificate for borrowers

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 borrowers’ 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

Tax benefits with a home loan provisional certificate

Under Sections 80C and 24 of the Income Tax Act, 1961, home loan borrowers must submit the provisional home loan 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 lakh 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.

Also, read – What is a commencement certificate?

Key components of a home loan provisional certificate

A provisional home loan certificate helps you track your annual interest and principal payments for tax planning. The vital components of a provisional certificate are:

  • Borrower details: It mentions the borrower’s name, loan account number, and basic identification information.
  • Lender information: A home loan provisional certificate details the lender’s name and branch, confirming the source of the loan.
  • Loan summary: It outlines the sanctioned amount, tenure, and outstanding balance at the start of the financial year.
  • Loan interest breakup statement: It shows the projected interest payable during the year, which is useful for claiming deductions under Section 24(b).
  • Principal breakup: This section highlights the principal amount expected to be repaid, helping you plan deductions under Section 80C.

How to obtain your home loan provisional certificate online and offline?

You can get a provisional certificate online by following the step-by-step process mentioned below. 

  1. Log in to your lender’s NetBanking or mobile banking portal using your credentials.
  2. Go to the ‘Loans’ or ‘Home Loan’ section in the menu.
  3. Select your home loan account to view available options.
  4. Look for ‘Provisional Certificate’ or ‘Tax Certificate’.
  5. Choose the financial year for which you need the certificate.
  6. Download the home loan provisional certificate in PDF format for your records.

Alternatively, here’s what you need to do to get the provisional housing loan certificate offline. 

  1. Visit your lender’s nearest branch during working hours.
  2. Approach the customer service desk and request a provisional home loan certificate.
  3. Provide your loan account number and identity proof if required.
  4. Fill out a simple request form if asked.
  5. The bank will process your request and print the provisional certificate.
  6. Collect the provisional home loan certificate and verify the details before leaving.

Also, read – Commencement of Business Certificate (COB)

How does a home loan provisional certificate help borrowers?

A provisional home loan certificate makes financial planning easier for borrowers. Here are the benefits of a provisional certificate:

  • Accurate tax planning: It highlights expected interest and principal repayments, helping you estimate deductions under Section 24(b) and Section 80C.
  • Easy documentation: You can use the home loan interest certificate for income tax filing or to submit to the employer for TDS adjustments. 
  • Clear loan overview: It provides a breakup of outstanding balance, interest payable, and principal repayment for the financial year.
  • Better financial budgeting: With projected repayment details mentioned in the provisional home loan certificate, you can plan monthly expenses and savings more effectively.
  • Proof of loan repayment: It acts as an official record of your ongoing home loan for any verification or future needs.

Also, read – What is a Solvency Certificate & How to Obtain it?

Important tips & considerations regarding the provisional certificate

You must keep these provisional certificate tips in mind when dealing with your housing loan certificate. 

  1. Verify loan statement details: Check your name, loan account number, interest, and principal breakup to ensure accuracy.
  2. Match figures with statements: One of the other things to check in a provisional certificate is the projected amounts against your EMI schedule. This helps to avoid discrepancies during tax filing.
  3. Download the latest version: Always use the home loan certificate for the current financial year, as older ones may show outdated figures.
  4. Submit it to your employer on time: If you want TDS adjustments, provide the certificate before your company’s deadline.
  5. Retain a copy for records: Keep digital and physical copies of the home loan interest certificate, as they may be needed for audits, loan transfers, or future reference.

Wrapping up!

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.

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FAQs

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.

Is the provisional certificate sufficient for tax filing?

 

Yes, it is generally sufficient for tax filing as it shows the projected interest and principal breakup. However, some employers or tax authorities may also ask for the annual home loan interest certificate for final confirmation.

Can joint borrowers use the same certificate?

 

Yes, joint borrowers can use the same certificate. Each borrower must claim tax benefits only in proportion to their ownership and repayment contribution.

What if there are pre-payments? Are they reflected in the housing loan certificate?

 

Pre-payments made after the provisional home loan certificate is generated are not reflected. You may need an updated certificate or the final annual interest certificate for accurate figures.

How to verify the details in the provisional certificate?

 

To verify the details in the provisional housing loan certificate, you can compare the principal and interest breakup with your EMI schedule, loan statements, and lender calculations.

Can the certificate be downloaded from my lender’s website?

 

Yes, most lenders allow you to download the provisional home loan certificate through their NetBanking portal or mobile app.

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