Hi
I couldn't find any threads discussing this issue ..If we have discussed pls send the link
I am planning to sell my house in Australia and expecting a lump sum of around 150,000 AUD (around 50 Lakhs) . I have taken loan against my house in Chennai (around 40 L) .I have 2 options
1. Settle 40L against the chennai loan and use the 10 L against mutual funds
2. Let the Loan as is (as iam planning to R2I next year and i may start using my Tax deductions against it) and utilise the 50 L for Investments (Mutual,etc etc)
Any sugessions
Does the investments yield me more than 11%(after tax) returns ?? if yes can you help me to zero down to thouse
Kannan
Accelerate Mortgage payoff vs investing in market, plot, real estate
Accelerate Mortgage payoff vs investing in market, plot, real estate
This issue has been discussed several times in the MSN Fin forum. Am game to discussing it afresh in this forum in this thread.
Not even God can answer your question without knowing the following:
(a) Loan interest rate - fixed or variable?
(b) Loan repayment period - when will it be repaid fully?
(c) Was the loan taken at the same time the India property was bought in order to acquire the property OR is it a loan taken after the property was bought, property being merely collateral?
(d) Marginal India tax rate after R2I, with and without home loan deductions?
(e) Will property be self-occupied or let out after R2I? If let out, what is the annual rental value?
I have made a list of info needed so that someone else who walks in and wants input on the same issue, supplies the needed info, before asking for input.
I dont know anything about Australian tax law. Will you be liable to Australian income tax even after R2I on India source income?
Not even God can answer your question without knowing the following:
(a) Loan interest rate - fixed or variable?
(b) Loan repayment period - when will it be repaid fully?
(c) Was the loan taken at the same time the India property was bought in order to acquire the property OR is it a loan taken after the property was bought, property being merely collateral?
(d) Marginal India tax rate after R2I, with and without home loan deductions?
(e) Will property be self-occupied or let out after R2I? If let out, what is the annual rental value?
I have made a list of info needed so that someone else who walks in and wants input on the same issue, supplies the needed info, before asking for input.
I dont know anything about Australian tax law. Will you be liable to Australian income tax even after R2I on India source income?
Accelerate Mortgage payoff vs investing in market, plot, real estate
If a person( X) is capable of buying a house ( 50L ) without a loan. X is in highest tax bracket in India( 30%).Can he gift the money to mother to buy the home at her (mothers) name . Then pay mother rent and get tax deduction on the rent he paid. Do you think this way you can avoid paying interest to the bank and also get the tax benefit. Mother will be living with the person X and she has no income in India.
Other scenario is, can he add his child?s name along with the mother in the registration to get the similar benefits.
Other scenario is, can he add his child?s name along with the mother in the registration to get the similar benefits.
Accelerate Mortgage payoff vs investing in market, plot, real estate
#3:
No India taxes (on X or X's mom) on gift to mother of 50 lacs which she is free to use any way she wants including buying a house. It is perfectly legal. It is also legal to pay rent to mother on property that she owns and lets out to her son/daughter. Mom will need to include rent in her income.
Regarding tax deductibility of rent paid to mother: Deduct against what income? Since the property is residential and is not used for business purposes, I can think only of HRA (house rent allowance) deduction if X is employed, and gets salary income. If so, yes, X can deduct the least of the following:
(a) Actual HRA
(b) Actual rent paid less 10% of basic salary
(c) 40% of salary in non-metros and 50% in metros.
http://in.rediff.com/getahead/2006/sep/14hra.htm
Including minor child's name as owner may create problems. Income from gifts to minor child are subject to clubbing of income provisions.
No India taxes (on X or X's mom) on gift to mother of 50 lacs which she is free to use any way she wants including buying a house. It is perfectly legal. It is also legal to pay rent to mother on property that she owns and lets out to her son/daughter. Mom will need to include rent in her income.
Regarding tax deductibility of rent paid to mother: Deduct against what income? Since the property is residential and is not used for business purposes, I can think only of HRA (house rent allowance) deduction if X is employed, and gets salary income. If so, yes, X can deduct the least of the following:
(a) Actual HRA
(b) Actual rent paid less 10% of basic salary
(c) 40% of salary in non-metros and 50% in metros.
http://in.rediff.com/getahead/2006/sep/14hra.htm
Including minor child's name as owner may create problems. Income from gifts to minor child are subject to clubbing of income provisions.
Accelerate Mortgage payoff vs investing in market, plot, real estate
Here are my answers
(a) Loan interest rate - fixed or variable?
Variable
(b) Loan repayment period - when will it be repaid fully?
15 Years from now.I am looking of options of paying off in next 1 year
(c) Was the loan taken at the same time the India property was bought in order to acquire the property OR is it a loan taken after the property was bought, property being merely collateral?
The property that i will be selling is in Australia . I am looking out option of settling the amount against the loan amount in india . The loan was taken before the house was build (from plan)
(d) Marginal India tax rate after R2I, with and without home loan deductions?
Too early to plan .It will be teh top bracket for sure :(
(e) Will property be self-occupied or let out after R2I? If let out, what is the annual rental value
Self occupied ..But how does this change my investment option if my tax bracket is in any way 30%
(a) Loan interest rate - fixed or variable?
Variable
(b) Loan repayment period - when will it be repaid fully?
15 Years from now.I am looking of options of paying off in next 1 year
(c) Was the loan taken at the same time the India property was bought in order to acquire the property OR is it a loan taken after the property was bought, property being merely collateral?
The property that i will be selling is in Australia . I am looking out option of settling the amount against the loan amount in india . The loan was taken before the house was build (from plan)
(d) Marginal India tax rate after R2I, with and without home loan deductions?
Too early to plan .It will be teh top bracket for sure :(
(e) Will property be self-occupied or let out after R2I? If let out, what is the annual rental value
Self occupied ..But how does this change my investment option if my tax bracket is in any way 30%
Accelerate Mortgage payoff vs investing in market, plot, real estate
Kannan,
There is a difference between Self-Occupied and Rented House/Flat when it comes to INCOME TAX Relief
1) For Self Occupied House the maximum relief that can be claimed is Rs 1.5 Lakhs per annum [If the house/flat is taken by 2 people who are equally contributing to the LOAN EMI then each can claim 1.5 Lakh] So if you are paying say 5 Lakhs per annum as interest even then you can only claim 1.5 Lakhs relief.
[If you are married and are planning life in India such that your Wife would also be employed then you can claim upto to a maximum of Rs 3,00,000 per annum as INCOME TAX Relief jointly provided both of you are contributing equally to paying the LOAN EMIs]
2) For a Rented House there is no limit to the amount of Relief you can claim provided you declare the rent and pay tax on it.
Consider the following scenario
a) Loan Interest - 5 Lakhs
b) Rent Received - Rs 30,000 per month
c) Property Tax - Rs 10,000 per year
In the above scenario the relief available would be calculated as below
(30000*12) - (10000) = 350000
(30%) of (350000) = 105000 [30% of (Rent after deducting taxes) can be claimed as STANDARD Deduction]
Rent after STANDARD DEDUCTION is
350000 - 105000 = 245000
Income = 245000, Loss = -500000 [Loan Interest Paid is a Loss]
Nett Income/Loss = 245000 - 500000 = -255000
So you have a loss of -255000 which can be offset from your INCOMEa nd would save you tax to the tune of 255000*0.3*1.1*1.02 = 85833
In the same scenario if your house was self occupied then you would only get Rs 1.5 Lakhs relief per annum on the INTEREST even though you are paying interest to the tune of 1/2 MILLION RUPEES per year.
I am hoping that this Rs 1.5 Lakh limit would be looked at closely and increased in the coming budget. But what will really happen is something that one will have to wait and see.
Hope this helps
[Refer to my other post regarding INDIA TAX PLANNING where I have given detailed explanations about quite a few INDIA TAX Reliefs available among them HOUSING LOAN INTEREST Relief, HRA, Donations, Medical Insurance and so on]
Regards
Venkat
There is a difference between Self-Occupied and Rented House/Flat when it comes to INCOME TAX Relief
1) For Self Occupied House the maximum relief that can be claimed is Rs 1.5 Lakhs per annum [If the house/flat is taken by 2 people who are equally contributing to the LOAN EMI then each can claim 1.5 Lakh] So if you are paying say 5 Lakhs per annum as interest even then you can only claim 1.5 Lakhs relief.
[If you are married and are planning life in India such that your Wife would also be employed then you can claim upto to a maximum of Rs 3,00,000 per annum as INCOME TAX Relief jointly provided both of you are contributing equally to paying the LOAN EMIs]
2) For a Rented House there is no limit to the amount of Relief you can claim provided you declare the rent and pay tax on it.
Consider the following scenario
a) Loan Interest - 5 Lakhs
b) Rent Received - Rs 30,000 per month
c) Property Tax - Rs 10,000 per year
In the above scenario the relief available would be calculated as below
(30000*12) - (10000) = 350000
(30%) of (350000) = 105000 [30% of (Rent after deducting taxes) can be claimed as STANDARD Deduction]
Rent after STANDARD DEDUCTION is
350000 - 105000 = 245000
Income = 245000, Loss = -500000 [Loan Interest Paid is a Loss]
Nett Income/Loss = 245000 - 500000 = -255000
So you have a loss of -255000 which can be offset from your INCOMEa nd would save you tax to the tune of 255000*0.3*1.1*1.02 = 85833
In the same scenario if your house was self occupied then you would only get Rs 1.5 Lakhs relief per annum on the INTEREST even though you are paying interest to the tune of 1/2 MILLION RUPEES per year.
I am hoping that this Rs 1.5 Lakh limit would be looked at closely and increased in the coming budget. But what will really happen is something that one will have to wait and see.
Hope this helps
[Refer to my other post regarding INDIA TAX PLANNING where I have given detailed explanations about quite a few INDIA TAX Reliefs available among them HOUSING LOAN INTEREST Relief, HRA, Donations, Medical Insurance and so on]
Regards
Venkat
Accelerate Mortgage payoff vs investing in market, plot, real estate
#5:
What is the interest rate? 35%, 3% or something else? I asked for interest rate and whether it is variable or fixed.
Can I assume that India home loan disbursement went toward acquisition of India house?
What is the interest rate? 35%, 3% or something else? I asked for interest rate and whether it is variable or fixed.
Can I assume that India home loan disbursement went toward acquisition of India house?
Accelerate Mortgage payoff vs investing in market, plot, real estate
Also, is there any prepayment penalty on India home loan? What about partial prepayments - any penalty on those?
Accelerate Mortgage payoff vs investing in market, plot, real estate
Hi all,
We have a Home Equity line of credit that we are thinking to pay off. The curr int rate on that is 6.27%. The loan balance is 25K and we have cash to pay it off.
Please let me know if it makes sense in yr opinion. We have auto loans and mortagae too, but for that, int rate is lower.
Thanks,
Ana.
We have a Home Equity line of credit that we are thinking to pay off. The curr int rate on that is 6.27%. The loan balance is 25K and we have cash to pay it off.
Please let me know if it makes sense in yr opinion. We have auto loans and mortagae too, but for that, int rate is lower.
Thanks,
Ana.
Accelerate Mortgage payoff vs investing in market, plot, real estate
ana;65347Hi all,
We have a Home Equity line of credit that we are thinking to pay off. The curr int rate on that is 6.27%. The loan balance is 25K and we have cash to pay it off.
Please let me know if it makes sense in yr opinion. We have auto loans and mortagae too, but for that, int rate is lower.
Thanks,
Ana.[/quote]What is the effective (after taking all deduction) interest rate? If all rates are same, payoff auto loans first because you won't get tax benefits on it.