Section I: Income Tax and Your House

• Ques: How Much to Borrow for Home
• Ans: Key points:
  • Generally, you should not borrow above 50% of take home salary.
  • The other monthly payments such as insurance premium must be deducted while calculating repayment capacity.
  • You should consider the tax benefits of home loan and the rate of interest on home loan while you decide how much to borrow.
  • IDEAL HOME LOAN - Home loan of Rs. 16 lakh @10% for 15 years is an ideal position to optimize on tax benefits per person. EMI comes to Rs. 17,194 X 12 = Rs. 2,06,328. Out of this, interest payable during the financial year is Rs. 1,57,817 and principal repayment is Rs. 48,511. You can use the home loan EMI chart for calculating the right plan for yourself at www.taxspanner.com.
  • In case of joint home loan, the limit of 16 lakh will be doubled accordingly.
  • The loan amount also depends on the value of the house you are buying as the banks typically allow only up to 85% of the total cost.