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HOUSE BUILDING ADVANCE
General Rules:
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The advance granted to the Government Servants for construction / purchase of house / flats are to be recovered as per the terms of the Mortgage Deed executed by the official, at the time of sanction of the advance.
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In the case of advance for purchase of ready-built house / flats, the recovery should be commenced from the pay of the month following the payment of the advance; in the case of advance for construction of house, the recovery should commence from the pay of the month following the completion of construction of the house or the pay of the 18th month after the date of payment of the first installment, whichever is earlier.
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If the advance is for purchase of plot and construction of house, the recovery should commence from the pay of the month following the completion of the house or from the pay of 24th month after the date on which the first installment is paid, whichever is earlier.
Interest
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For advances sanctioned on or after 25-11-1985, the interest will be charged based on the amount of advance sanctioned, instead of at the slab rates and the rate of interest will be as follows :-
|
RATE OF INTEREST PER ANNUM |
||||||
| If the sanctioned HBA is up to | 25-11-85 to 23-6-87 | 26-6-87 to 25-7-90 | 26-7-90 to 15-12-97 | 16-12-97 to 31-3-2001 | 1-4-2001 to 31-3-2002 | 1-4-2002 onwards |
| Rs. 25,000/- | 7% | 7% | 7.5% | 7.5% | 6.5% | 6% |
| Rs. 50,000/- | 7.5% | 7% | 7.5% | 7.5% | 6.5% | 6% |
| Rs. 75,000/- | 8% | 8% | 9% | 9% | 8% | 7.5% |
| Rs. 1,00,000/- | 8.5% | 8% | 9% | 9% | 8% | 7.5% |
| Rs. 1,25,000/- | 9% | 9% | 10% | 9% | 8% | 7.5% |
| Rs. 1,50,000/- | .... | 9% | 10% | 9% | 8% | 7.5% |
| Rs. 2,00,000/- | .... | 10% | 11% | 11% | 10% | 9.5% |
| Rs. 2,25,000/- | .... | 10.5% | 11.5% | 11% | 10% | 9.5% |
| Rs. 2,50,000/- | .... | 11% | 12% | 11% | 10% | 9.5% |
| Rs. 5,00,000/- | .... | .... | .... | 11% | 10% | 9.5% |
| Rs. 7,50,000/- | .... | .... | .... | 12% | 11% | 10.5% |
For example, an official obtaining a loan of Rs. 50,000/- on 01-10-1990, will be charged interest at 7.5% while the same official will have to pay interest at 9% if he obtains a loan of Rs. 50,500/-.
Interest is calculated on the balance of HBA outstanding on the last day of the month i.e. on the IBB just like calculation of interest on advance for purchase of conveyance, etc.
- Interest on H.B.A. is exempt u/s 24(b) of Income Tax Act.
This amount can be shown as per below :
Gross Salary Income Rs. ............../-
Less Exemption u/s10 i.e. Rent Paid Rs. ............../-
Less Standard Deduction Rs. ............../-
Less Exemption u/s 24 (b) i.e. Interest on HBA Rs. ............../-
Less Exemption under Chapter VIA Rs. .............../-
Net Taxable Income Rs. ............../-
- Exemption for Interest portion of HBA is admissible up to maximum of Rs. 1,50,000/- if HBA has been sanctioned on or after 01/04/1999.
- Exemption is admissible up to maximum of Rs. 30,000/- if HBA has been sanctioned on or before 31/03/1999.
If any individual has drawn House Building Loan from any other financial institution, at the end of the year he should obtain a certificate from that financial institution showing repayment of loan details. In that repayment of Principal sum and Interest portion should be clearly mentioned. Accordingly income tax rebate can be taken on principal sum and interest sum.
- Repayment of Principal sum of H.B.A. is exempt u/s 88 of Income Tax Act.
This can be shown along with GPF Contribution/L.I.C. Premium/P.L.I. Premium etc. of which maximum rebate admissible is Rs. 70,000/-.
Repayment of HBA of Rs. 20,000/- as principal sum is exempted under section 88 if HBA has been sanctioned on or after 01/04/1999.
Exemption is admissible up to maximum of Rs. 10,000/- u/s 88 as recovery of principal amount, if HBA has been sanctioned on or before 31/03/1999.
Example of Calculation of Interest on H.B.A. :
A Government servant drawing a basic pay of Rs. 5,000/- was sanctioned an advance of Rs. 2,00,000/- which was paid in two instalments on March 2003 and August 2003. The advance to be repaid in 100 installments of Rs. 2,000/- each. Rate of interest 9.5% per annum. Recovery of the advance commenced from the pay of October 2003. Provisional interest calculation for the year 2004-05 is given below.
| Month and Year | Amount Paid | Amount Recovered | I.B.B. | Cumulative Amount |
| 03/2003 | 1,00,000 | 1,00,000 | ||
| 04/2003 | 1,00,000 | |||
| 05/2003 | 1,00,000 | |||
| 06/2003 | 1,00,000 | |||
| 07/2003 | 1,00,000 | |||
| 08/2003 | 1,00,000 | 2,00,000 | ||
| 09/2003 | 2,00,000 | |||
| 10/2003 | 2,000 | 1,98,000 | ||
| 11/2003 | 2,000 | 1,96,000 | ||
| 12/2003 | 2,000 | 1,94,000 | ||
| 01/2004 | 2,000 | 1,92,000 | ||
| 02/2004 | 2,000 | 1,90,000 |
18,70,000 |
|
| 03/2004 | 2,000 | 1,88,000 | ||
| 04/2004 | 2,000 | 1,86,000 | ||
| 05/2004 | 2,000 | 1,84,000 | ||
| 06/2004 | 2,000 | 1,82,000 | ||
| 07/2004 | 2,000 | 1,80,000 | ||
| 08/2004 | 2,000 | 1,78,000 | ||
| 09/2004 | 2,000 | 1,76,000 | ||
| 10/2004 | 2,000 | 1,74,000 | ||
| 11/2004 | 2,000 | 1,72,000 | ||
| 12/2004 | 2,000 | 1,70,000 | ||
| 01/2005 | 2,000 | 1,68,000 | ||
| 02/2005 | 2,000 | 1,66,000 |
*21,24,000 |
* (Cumulative Total for the period 01/03/04 to 28/02/05 = Total of IBB of 03/2004
Rs. 1,88,000/- to IBB of 02/2005 Rs. 1,66,000/-)
Calculation of Notional Interest :
Cumulative I.B.B. from 01/03/04 to 28/02/2005 Rs. 21,24,000/-
21,24,000 x 9.5
---------------------- = Rs. 16,815/- Interest .
1200
Therefore in above case individual can show Rs. 16,815/- as interest portion (accrued). Out of recovery of Rs. 24,000/- Rs. 20,000/- can be shown as exemption u/s 80(c) whereas Accrued Interest on HBA Rs. 16,815/- can be shown as exempt u/s 24(b).