The Hindu Business Line : Issues involving interest certificate for EMI paid

I took a housing loan in 2003 for Rs 8.30 lakh from a public sector bank (PSB) and have been paying Rs 6,673 under EMI (equated monthly installments).

Till last year, I was provided interest certificate by the bank giving effect to the total interest debited in the account, that is, the total amount of interest debited in the account and the interest amount mentioned in the interest certi ficate are one and the same.

Accordingly, I submit Form 12 C to my employer. This year, the bank has given an interest certificate wherein the amount mentioned and the total interest debited in the account do not match.

On enquiring with the bank, I was told that since the EMI is spread over a period, the bank can give certificate only on the basis of apportioning of the installment towards interest and principal. This way, the amount of interest is very l ess than the total amount debited in the account statement. However, I have submitted Form 12C claiming for total housing loan interest as per the account statement. For example, total interest debited in the housing loan account amounting to Rs 75,135 after taking into account the change in interest rate from time to time but the interest amount mentioned in the certificate is only Rs 46,080. By way of installments, I have paid Rs 82,038 during the year. Please clarify the following:

a) The effects and implications of housing loan interest as per the I-T Act where payment is made under EMI when the rate of interest is changing from time to time.

(b) Whether the stand taken by the bank is correct (that is, issue certificate only for the interest/principal apportioned under EMI) inasmuch as the same bank has given interest certificate as per the account statement earlier?

B. Lakshmi, Coimbatore

My own feeling is that the problem has arisen due to the fact that you have presumably taken the loan under floating rate of interest. As you might be aware, the banks as far as possible do not change the EMI amount consequent upon hike in the floating rate of interest but instead lengthen the term of the loan. And when this is done, the interest component in the EMI pie would naturally go up. What the banks seems to have done is to debit your account in an ad hoc manner but scient ifically calculated the interest later on at the end of the year when the time came for issuing the certificate for tax purposes. The certificate would hold sway as far as the tax assessment is concerned.
Rebate on home loan

I work in Hossur, Tamil Nadu, and recently I purchased a flat in Bangalore for which I am looking for a tenant. Can I get the tax benefits on the related home loan? Will the house be exempt from tax?

Ramesh Maharana, email

The house is exempt from tax as it is. If you show it as a rented property, the vacancy rebate would reduce the annual value to nil. If you show it as a property under lock and key and the reason for the same is employment or business, again you make the grade for nil value assuming this to be your only house.

Interest is deductible in full in case you show it as a let-out house but only up to Rs 1.5 lakh if you show it as a property under lock and key. The principal makes the grade for deduction under Section 80C.

S. MURLIDHARAN
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