I want to purchase a 15-year-old residential flat. Will I get a home loan for this old property? Do banks follow different criterion to give loans for old property as compared to newer ones? What percent of total amount of this property can I get as home loan?
Answer: You can get a home loan for new as well as resale property based on various factors, such as your income, age, and the title of the property. So, the age and condition of the property being purchased has a bearing on loan eligibility. Typically, banks are reluctant to lend money for old properties. In your case, as the property is only 15 years old and presumably must be in a good condition, you are unlikely to have any problem in getting the home loan from any bank. Banks normally lend between 75 per cent and 90 per cent of the value of the property as loan.
Do note that most banks also get the property valued independently and extend the loan based on their value rather than the amount mentioned in the purchase agreement in case the agreement value is higher. Generally, the valuation of the bank’s valuer is significantly lower than the actual cost, and hence, your effective downpayment goes up.
We are Indian Citizen whereas our daughter is an American citizen. Can she invest in Public Provident Fund (PPF) or the National Pension System (NPS)?
Answer: Under Rule 4(1) of the Government Savings Promotion General Rules, 2018, only an Indian Citizen is entitled to open an account under PPF. As your daughter is a foreign national, she cannot invest in PPF.
As you are Indian citizen and your daughter is an American citizen, she will qualify as a person of Indian origin (POI). Under the amended rule, all Indian citizens as well as PoIs who have completed 18 years of age can invest in NPS. For opening an account by a non-resident Indian (NRI) and PoI under NPS, he/she would need to have a bank account in India in addition to having a valid permanent account number (PAN).
If the agreement value for sale of my flat is less than the circle rate, will I have any problem?
Answer: There are some special provisions under the income tax laws for valuation of land and building for the computation of capital gains.
Under Section 50C of the Income-tax Act, 1961, if the value adopted for stamp duty purpose (circle rate as mentioned in your question) for sale of land or building is more than 110 per cent of the sale consideration mentioned in the sale deed, then the value according to the stamp duty laws will be taken into account for computing capital gains.
Thus, if the stamp duty value is higher by more than 10 per cent of the agreement value, you will have to pay capital gains on the stamp duty valuation amount even though you might actually not have received the same.
In case of the buyer, if the excess of stamp duty valuation over the agreement value is higher by more than 10 per cent, and if the same exceeds Rs. 50,000, such difference is treated as gift in the hands of the buyer under Section 56(2) of the Income-tax Act, 1961.
The author is a tax and investment expert
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