I paid a sum of Rs. 8,000 as processing fee to avail a home loan from a bank in May 2003. Will I be eligible for any tax benefit on this payment?
I have paid a switching fee to my lender to switch from an adjustable rate home loan to a fixed rate home loan. Is any deduction available for such switching fee?
Section 2(28A) of the I-Tax Act defines interest to include any service fee or other charge in respect of the monies borrowed or debt incurred. Therefore, the processing fee can be treated as interest and a deduction can be claimed accordingly.
However, a practical problem can arise where the property is self occupied. You need a certificate from your lender regarding the fees payable and most lenders are not aware that the fee is also eligible for deduction as interest under the I-T Act. The only way out is to ask the bank to provide a certificate about the fees payable as being in respect of a home loan to make yourself eligible to claim this deduction.