Interest bearing advances/Sixth Central Pay Commission recommendation on House Building Advance-enhancement in past cases-regarding

No.I-17011/2(1)/2009-H.III
Government of India
Ministry of Urban Development
(Housing -III section)
*****

Nirman Bhawan, New Delhi.
Dated:- the 14th July, 2010

OFFICE MEMORANDUM

Subject:     Interest bearing advances/Sixth Central Pay Commission recommendation on House Building Advance-enhancement in past cases-regarding.

       The undersigned is directed to invite attention to this Ministry's O.M. No.I-17011/2(1)/2009-H.III dated 27th November, 2008 on the above subject and to say that it has been decided in consultations with Ministry of Finance to make the afore-said orders applicable with effect from 1st January, 2006. Accordingly, an enhancement of House Building Advance, if applied for, may be granted for an amount equivalent to the difference between the previously sanctioned amount and the new amount determined on the basis of pay in the pay band, in past cases, where HBA was sanctioned on or after 1-1-2006 but before 27-11-2008 subject to complying following conditions:-

(a)       The Government servant should not have drawn the entire amount of HBA sanctioned under earlier orders and /or where construction is not completed/full cost towards acquisition of house/flat is yet to be paid.

(b)       There will be no deviation from the approved plan of construction on the basis of which the original sanction of House Building Advacne was accorded. The revised cost of the original plan can, however, be considered for determining the additional amount, subject to the prescribed maximum limits.

(c)       Supplementary Mortgage Deed, Personal Bond and Sureties will be drawn and executed at the expense of the loanee.

(d)       The actual entitlement will be restricted to the repaying capacity computed on the basis of the formula laid down in this Ministry's O.M. No.I-17015/16/92-H.III. dated 17.10.2000. It should be ensured that the entire amount of advance with interest is recovered before retirement of the Government servant.

(e)       Rate of Interest: The rate of interest chargeable in such cases would be as per the slab applicable to the total sanctioned amount i.e. amount already sanctioned on or after 1-1-2006 but before 27.11.2008 plus the enhanced sanction. However, the new rate of interest would be chargeable only on collective amount that would remain outstanding on grant of enhancement so granted. Thus, the amount of HBA that has already been re-paid on old rates will not attract the fresh interest charges.

2.       However, the existing limit of maximum admissible amount of Rs.7.50 lakh for the purpose of construction/purchase of new house/flat and Rs.1.80 lakh would remain unchanged. In other words, the sum total of previously sanctioned HBA and the enhancement granted under these orders cannot exceed the aforesaid limits. In any case, not more than one enhancement is admissible to a Govt. employee.

3.       The applications for enhanced HBA should be submitted within six months from the date of issue of this order.

4.       Ministries/Departments whose branch offices are situated in the far flung areas like in case of Ministry of Defence, etc., are advised to give wider publicity to these orders through modern communication mean like facimile e-mail, web-sites etc. so that there is no occassion for any representation for extending the time limits of six months on the grounds of receiving these orders late.

s/d
(V.K. Gupta)
Deputy Financial Adviser

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Interest bearing advances/Sixth Central Pay Commission recommendation on House Building Advance-enhancement in past cases-regarding

No.I-17011/2(1)/2009-H.III
Government of India
Ministry of Urban Development
(Housing -III section)
*****

Nirman Bhawan, New Delhi.
Dated:- the 14th July, 2010

OFFICE MEMORANDUM

Subject:     Interest bearing advances/Sixth Central Pay Commission recommendation on House Building Advance-enhancement in past cases-regarding.

       The undersigned is directed to invite attention to this Ministry's O.M. No.I-17011/2(1)/2009-H.III dated 27th November, 2008 on the above subject and to say that it has been decided in consultations with Ministry of Finance to make the afore-said orders applicable with effect from 1st January, 2006. Accordingly, an enhancement of House Building Advance, if applied for, may be granted for an amount equivalent to the difference between the previously sanctioned amount and the new amount determined on the basis of pay in the pay band, in past cases, where HBA was sanctioned on or after 1-1-2006 but before 27-11-2008 subject to complying following conditions:-

(a)       The Government servant should not have drawn the entire amount of HBA sanctioned under earlier orders and /or where construction is not completed/full cost towards acquisition of house/flat is yet to be paid.

(b)       There will be no deviation from the approved plan of construction on the basis of which the original sanction of House Building Advacne was accorded. The revised cost of the original plan can, however, be considered for determining the additional amount, subject to the prescribed maximum limits.

(c)       Supplementary Mortgage Deed, Personal Bond and Sureties will be drawn and executed at the expense of the loanee.

(d)       The actual entitlement will be restricted to the repaying capacity computed on the basis of the formula laid down in this Ministry's O.M. No.I-17015/16/92-H.III. dated 17.10.2000. It should be ensured that the entire amount of advance with interest is recovered before retirement of the Government servant.

(e)      Rate of Interest: The rate of interest chargeable in such cases would be as per the slab applicable to the total sanctioned amount i.e. amount already sanctioned on or after 1-1-2006 but before 27.11.2008 plus the enhanced sanction. However, the new rate of interest would be chargeable only on collective amount that would remain outstanding on grant of enhancement so granted. Thus, the amount of HBA that has already been re-paid on old rates will not attract the fresh interest charges.

2.      However, the existing limit of maximum admissible amount of Rs.7.50 lakh for the purpose of construction/purchase of new house/flat and Rs.1.80 lakh would remain unchanged. In other words, the sum total of previously sanctioned HBA and the enhancement granted under these orders cannot exceed the aforesaid limits. In any case, not more than one enhancement is admissible to a Govt. employee.

3.       The applications for enhanced HBA should be submitted within six months from the date of issue of this order.

4.      Ministries/Departments whose branch offices are situated in the far flung areas like in case of Ministry of Defence, etc., are advised to give wider publicity to these orders through modern communication mean like facimile e-mail, web-sites etc. so that there is no occassion for any representation for extending the time limits of six months on the grounds of receiving these orders late.

s/d
(V.K. Gupta)
Deputy Financial Adviser

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Rebate only if capital for house is borrowed

Rebate only if capital for house is borrowed

I own a house in Ahmedabad that I occupy. I propose to buy a house in the same city. What is the tax impact on such a purchase? What deductions are available if I make such a purchase? – Dharmesh

The purchase as such will not lead to any tax implications. Note that only one property can be treated as self-occupied and the annual value taken as NIL. In respect of the other, the property will be treated as deemed to be let out and the annual value would be taken to be the sum for which the property can be leased.

The property that is to be treated as self occupied where more than one property is self occupied would be at the option of the assessee.

Deductions are available in respect of interest on capital borrowed and principal repayment of housing loan u/s 24 and u/s 80C respectively. A deduction in respect of purchase by itself will however not be available.

I had invested Rs 25,000 in a fixed deposit for one year at 8 per cent per annum. The fixed deposit will be maturing this month and I wish to renew it along with the interest.

Do I have to pay tax in respect of the interest now, as I fall within the tax bracket, or can I offer the entire interest to tax when I close the fixed deposit? – Sapna

At the time when the fixed deposit is renewed along with the interest accrued thereon, the interest will be deemed to have been paid and therefore such interest will have to be brought to tax if you are following the cash system of accounting in respect of such source of income being interest from fixed deposits.

It appears that you are not following the mercantile system of accounting as, if that had been so, the interest would have had to be offered on a year-to-year basis when it accrued.

This is in reference to the reply published in respect of the query on setting off of losses from trading in futures and options.

If I satisfy all the conditions that have been stated in the amended provisions of section 43(5) and if my loss is to be treated as non-speculative, can it be set off against income from bank interest and rental income received in the same financial year? – Sundar

If you satisfy all the conditions stated in section 43(5), the loss would be treated as a business loss and not as a speculation loss and can consequently be set off against any income of the year other than salary income.

If it cannot be so set off, it can be carried forward and set off against business income within eight assessment years immediately succeeding the assessment year in which the loss was first computed.

It may be noted that the conditions stipulated in section 43(5) are as follows: The transaction is carried out electronically on by screen-based systems; the transaction is carried out through a registered broker or sub-broker; the transaction is supported by a time stamped contract issued by such broker or sub-broker; the contract note indicates the unique client identity number and permanent account number.

I am a Central Government employee. As I was appointed in October 2005, I fall under the New Pension Scheme. My salary comprised of basic pay, grade pay, HRA, dearness allowance and transport allowance.

Deduction towards provident fund of Rs 3,499 and contribution towards CGEIS is being made from my salary income. Can I get any deduction u/s 80C by investing up to Rs 1,00,000? If yes, how? – Dr Jai Gopal Sharma

You can claim a deduction u/s 80C by making investments.

The maximum deduction available under this section is Rs 1,00,000 and the deduction is available in respect of certain payments and investments.

The payments and investments also include employees' contribution to a recognised provident fund and contributions to CGEIS (Central Government Employees' Group Insurance Scheme).

In your case as you are contributing to a provident fund (if the same is recognized) and to Central Government Employees' Group Insurance Scheme, the maximum investment other than contribution to provident fund and CGEIS that will qualify for deduction will be Rs 1,00,000 as reduced by the amount of contribution to such provident fund and CGEIS.

This deduction can be claimed by you by giving proof to your employer who can take it into account while computing the tax to be deducted at source from your salary or alternatively by filing a return of income and claiming a refund in respect of the excess tax deducted at source or by adjusting it against other tax payable.

Mail your queries to taxtalk@thehindu.co.in or by post to ‘Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002


Source: The Hindu Business Line

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1% interest subvention on housing loans upto Rs.10 lakh

The Cabinet today approved the Scheme of 1% interest subvention on housing loans up to Rs.10 lakh and the allocation of a sum of Rs.1000 crore for the Scheme.

Point-wide Details

• Interest subvention of 1 percent will be made available on individual housing loans upto Rs.10 lakh for construction / purchase of a new house or extension of an existing house provided the cost of the construction/price of the new house/extension does not exceed Rs. 20 lakh.

• The Scheme will be implemented through Scheduled Commercial Banks (SCBs) and Housing Finance Companies (HFCs) registered with the National Housing Bank (NHB).

• The first twelve instalments of all such loans sanctioned and disbursed during the period of twelve months from the date of publication of the scheme will be eligible for interest subvention.

• Subsidy of one percent will be computed for 12 months on disbursed amount and adjusted upfront in the principal outstanding irrespective of whether the loan is on fixed or floating rate basis.

• Reserve Bank of India (RBI) will be designated the nodal agency for SCBs and National Housing Bank (NHB) will be designated the nodal agency for HFCs.

Background

There has been a notable deceleration in the sectoral flow of credit to the housing sector which is attributable to increase in the price of houses, slackening of income growth and a rise in interest rates for housing loans.

The Finance Minister in his reply to the debate on the Finance Bill in the Lok Sabha on 27th July, 2009 made the announcement that housing, particularly lower and middle income housing, deserved to be supported. In order to stimulate this segment of house owners, he proposed to provide support to borrowers by way of interest subvention of 1% on all housing loans up to Rs.10 lakh to individuals, provided the cost of the house does not exceed Rs.20 lakh.

Implementation Strategy and targets

All Scheduled Commercial Banks (SCBs) and Housing Finance Companies (HFCs) will submit a monthly consolidated return to the Reserve Bank of India (RBI) and National Housing Bank (NHB) respectively, specifying interest subvention given.

The nodal agencies will put up a demand to the Government of India for release of subsidy amount and the Government of India in turn will sanction and release the subsidy amount based on demand received.

The number of beneficiaries covered under the scheme will depend, interalia, upon the size of the loan amount and the number of beneficiaries approaching the nodal agency for interest subvention. Being a demand driven scheme no specific targets for coverage of beneficiaries have been fixed.

Major Impact:

It is expected that cut in interest rates should reduce Equated Monthly Instalments (EMIs) of borrowers and create additional demand for housing. This in turn should stimulate demand in construction industry as well as industries such as steel & cement having employment potential and income multiplier effect.

Expenditure involved:

An amount of Rs.1000 crore will be allocated in the Budget for the year 2009-10 for implementation of the Scheme.

No. of beneficiaries:

On a housing loan of Rs.10 lakh, the 1% interest relief available wil amount to Rs.10,000/- per account. As such, the Scheme of a size of Rs.1000 crore is expected to cover 10 lakh beneficiaries in one year period.

States/Districts covered:

The scheme will cover all States & Union Territories of the country, including rural & urban areas.

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CHB to facilitate central govt's housing scheme

Chandigarh Housing Board (CHB) will play the role of facilitator for effective implementation of the Union government’s Interest Subsidy Scheme for Housing the Urban Poor (ISHUP).
The scheme aims at providing cheap home loan to economically weaker sections (EWS)/low income group (LIG) people for acquisition or construction of houses. With the assistance of NHB and HUDCO, CHB will pass out the benefits envisaged to EWS/LIG beneficiaries in forthcoming housing plan under the said scheme in Sector 63, Maloya and Dhanas.
The economic parameters for eligible EWS beneficiaries as per the scheme are households having an average monthly income up to Rs. 3,300/- and that for LIG beneficiaries are households having an average monthly income between Rs 3,301 and Rs 7,300. The subsidy will be 5% per annum on interest charged on the admissible loan amount for EWS and LIG, over the full period of loan for construction or for acquisition of a new house.
A high level meeting to sensitize all states about various aspects of the scheme and to ensure smooth passage of benefits under the scheme was conducted by the government of India and UT was represented by finance secretary Sanjay Kumar along with officers of CHB.
Kumar said the scheme will provide housing loan, with subsidized interest, for a period of 15-20 years with a maximum limit of Rs 1 lakh to an EWS individual for a house of at least 25 sq. mtrs.
Additional loan, if needed will be at unsubsidized rate of interest. Furthermore, the scheme lays down that for a LIG individual the maximum loan amount admissible will be Rs 1.60 lakh for a house of at least 40 sq. mtrs.
The government has appointed National Housing Bank (NHB) and Housing and Urban Development Corporation Ltd. (HUDCO) as nodal agencies for implementation of the scheme. The subsidy will be released by the government to nodal agencies who in turn will pass on the same to the banks and housing finance companies for disbursement of the housing loan.
The scheme further envisages that primary security for the housing loan will be mortgage of the dwelling unit and there will not be any other collateral security/third party guarantee for loans up to and inclusive of Rs 1 lakh and no prepayment charges would be levied by the banks/HFCs under the scheme.

Source: The Times of India

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House Building Advance to Central Government Employees

An important order has been published from Ministry of Urban Development regarding House Building Advance to Central Government Employees.

1.House Building Advance is admissible to all those temporary employees also, who have rendered 10 years of continuous service.

2.With effect from 27-11-2008.

3.The maximum limit for grant of HBA shall be 34 months' of pay in the pay band.

4.Subject to a maximum of Rs. 7.50 lakh or cost of the house or the repaying capacity whichever is the least, for new construction/purchase of new house/flat.

5.The maximum limit for grant of HBA for enlargement of existing house shall be 34 months' pay in the pay band.

6.Subject to a maximum of Rs. 1.80 lakh or cost of the enlargement or repaying capacity, whichever is the least.

7.The cost ceiling limit shall be 134 times the pay in the pay band.

8.Subject to a minimum of Rs.7.50 lakh and a maximum of Rs.30 lakh relaxable up to a maximum of 25% of the revised maximum cost ceiling of Rs.30 lakh.

9.The rate of interest on House Building Advance is between 5% to 9.5% ,depending on the loan amount.

10.The repaying capacity of Govt. servants who have more than 20 years of remaining service has been revised from 35% to 40% of pay.

CONDITIONS:

The applicant or spouse or minor child should not already own a house in the town/Urban agglomeration where the house is proposed to be constructed or acquired.

b) The title to the land should be clear. The land may be owned either:
- by the Government employee; or
- jointly by the Government employee and spouse.

COST CEILING:

134 times of pay in the pay band subject to a minimum of Rs. 7.50 lakh and a maximum of Rs.30 lakh (Cost of the house, excluding cost of land should not exceed 134 times of the Basic Pay excluding Grade Pay)

Administrative Ministry may relax the cost ceiling to 25% of cost ceiling mentioned above in the individual cases on merits.

Effective from 27th November, 2008.

Eligibility, Purposes and Conditions as follows...

If both husband and wife are Government Employees, Advacne is admissible to only one of them.

Acquiring a plot and constructing a house thereon.

Enlarging living accomodation in an existing house owned by the employee or jointly with spouse. The total cost of the existing structure (excluding cost of land) and the proposed additions should not exceed the prescribed cost ceiling.

Purchase of house / flat under "Self - Financing Housing Scheme and " Co-operative Group Housing Societies".

For purchase of houses / flat from private parities, i.e., registered builders, architects, house building societies, etc., but not from private individuals.

If GPF withdrawl is also taken for house building, the total amount of GPF withdrawl and the House Building Advance should not exceed the cost-ceiling limit.

House / Flat constructed / acquired with the help of HBA to be used for residential purpose only.

The advance will be limited to the estimated cost of consturction.

Only one advance is admissiable during the entire service.

The amount of advance shall be restricted to the repaying capacity of the employee.

The amount of advance sanctioned can be reduced at the request of the employee to avail of the reduced rate of interest, if the entire advance has not been drawn.

For purchase / Construction of flat or Purchase of a house the amount of advance sanctioned in one lumpsum.

The construction should be exactly according to the approved plan and specification.

The consturction should be completed whithin 18 months of the dateon which the first instalment is drawn.

On completion of construction/purchase, the house should be insured by the employee at his cost against fire, flood and lightning for the full value of the house.

No interest is chargeable beyond the date of reirement/ death of the government employee.

The rate of interest will be reduced half per cent for an employee who undergoes sterilization(family planing).

The entire amount of advacne together with interest is repayable in 20 years. 180 monthly instalments for principal and 60 instalments for interest.

Recovery will commence from the pay for the month following that in which advance is taken.

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House Building Advance-enhancement in past cases-regarding

No.I-17011/11(4)/2008-H.III
Government of India
Ministry of Urban Development
(Housing -III section)
*****

Nirman Bhawan, New Delhi.
Dated:- the 27th Nov, 2008

OFFICE MEMORANDUM

Subject:     Interest bearing advances/Sixth Central Pay Commission recommendation on House Building Advance-enhancement in past cases-regarding.

       The undersigned is directed to say that the implementation of the recommendations of the Sixth Central Pay Commission relating to interest bearing advances, including House Building Advance, granted to Central Government employees is under consideration of the Government.

2.      Pending finalisation of the new arrangements, the matter has been examined in consultation with the Department of Expenditure and the following provisions for House Building Advance shall be in operation:

(i)       The maximum limit for grant of HBA shall be 34 months' of pay in the pay band subject to a maximum of Rs.7.50 lakh or cost of the house or the repaying capacity whichever is the least, for new construction/purchase of new house/flat.

(ii)       The maximum limit for grant of HBA for enlargement of existing house shall be 34 months' of pay in the pay band subject to a maximum of Rs. 1.80 lakh or cost of the enlargement or repaying capacity, whichever is the least.
(iii)       The cost ceiling limit shall be 134 times the pay in the pay band subject to a minimum of Rs.7.50 lakh and a maximum of Rs.30.00 lakh relaxable up to a maximum of 25% of the revised maximum cost ceiling of Rs.30.00 lakh.

4.       All Ministries/Departments of Government of India are requested to bring the contents of this O.M. to the notice of all concerned.

5.       These orders shall be effective from the date of their issue.

s/d
(V.K. Gupta)
Deputy Financial Adviser

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HOUSE BUILDING ADVANCE AND VEHICLE ADVANCE

HOUSE BUILDING ADVANCE - COMPUTER ADVANCE AND VEHICLE ADVANCE

Most of the VI Pay Commission orders are released with official notification (Gazette) followed by departmental confirmation and notification. But so far we have not come across notification with regard to advances for the purchase of Vehicles, Housing Loan etc.

Sixth pay commission says that all the loans/advances will be carried out by Banks with 2% subsidy on the eligible amount. Is it possible to know when the official orders will be released and reach the departments.

Hope many of the central governmental employees are eagerly waiting for the gazette notification and official communication.

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