What Is A Home Loan Provisional Certificate? All You Need To Know

A home loan provisional certificate (HLPC) is an outline of your home loan details. It includes the details of the principal amount and interest on your home loan.

With increasing home affordability and tax benefits available for home loans, the demand for home loans has increased significantly.  If you have taken a home loan, you must have a provisional certificate. Using this certificate, you can claim certain tax relief on housing loans.

Often, borrowers do not understand the difference between a home loan provisional certificate and a provisional home loan interest certificate. We are here to help you understand how these two are different by explaining how they work.

In this article, you will get to know about the following:

• Concept of a home loan provisional certificate and a provisional home loan interest certificate.
• Use of these certificates. 
• Tax benefits you can avail using a home loan provisional certificate. 

What Is A Home Loan Provisional Certificate (HLPC)?

This certificate is an official document that gives you all the details about the home loan status. For example, you have taken a home loan to build your dream house at a location of your choice. In this case, you can use this certificate to keep track of the principal and interest payments paid by you in a particular year.

Your lender will send your home loan provisional certificate at the beginning of every year for your record until completion of the loan, with the following details:

• Your personal details.
• The home loan account number, the entire loan amount, and start and end date of the loan.
• The interest rate and the interest type, whether it is fixed or floating, where the latter keeps changing during the loan tenure.
• The amount you have already repaid, including any missed repayment dates.
• If you have missed any payments, your certificate will have information about the new principal considering the missed payments.
• The amount due to be paid in the current year.

What Is A Provisional Home Loan Interest Certificate (PHLC)?

Now contrary to the Home Loan Provisional Certificate (PHLC), at the end of each year, you receive a provisional home loan interest certificate, which is the evidence of the loan’s principal and interest repayments you have made in the year. You can also use it for tax deduction purposes.

What Are The Uses Of A Home Loan Provisional Certificate?

The main goal of this HLPC certificate is to help you keep documentation of your home loan account. Here are some advantages of this certificate:

• Since you receive it at the beginning of the year, it allows you to plan how you would like to proceed with the payments. This information will facilitate financial planning from your end.
• It will also give you an easy access to repaid and due amount information.

How Can You Avail Tax Benefits From Your Certificates?

Let assume you have made a portion of your home loan interest payment and principal repayment. In this case, you must submit your provisional home loan interest certificate (PHLC) when filing your income tax returns. Let us split this into sections from the Income Tax Act and explain how you can claim tax deductions under Section 24, Section 80EE, Section 80EEA and Section 80C.

Section 24

If you have a self-occupied property, you can claim a deduction of up to Rs.2,00,000 per financial year for your interest payments if you meet the following eligibility criteria:

• You took a loan after 1st April 1999 for the construction or acquisition of property. 
• Acquisition/construction of the respective property is completed within five years from the end of the financial year in which you took the loan. For example, if you took a loan on 1st April 1999 then the property construction should have been completed by 31st March 2005, i.e. five years from the end of the Financial Year 1999-2000.
• You need to specify whether the respective interest amount is payable on the loan taken for the purposes mentioned above or if you took the loan to refinance any loan taken to construct or acquire the property.

If you fail to meet any of the above conditions, your maximum deduction amount can only be Rs.30,000.

Section 80EE

To avail of the tax deduction of up to Rs.50,000 per financial year on home loan interest under this section, you should fulfil the following criteria:

• Your loan should have been sanctioned between 1st April 2016 and 31st March 2017.
• Your loan amount should not be more than Rs.35 lakh.
• Your residential property’s value should not be more than Rs.50 lakh.
• You should not own any other residential property on the date the loan has been sanctioned.

Section 80EEA 

This section allows a maximum deduction of Rs.1,50,000 per financial year from your taxable income. If you do not qualify for tax benefits under Section 80EE, you can check the eligibility criteria under this section as per which:

• Your loan should have been sanctioned between 1st April 2019 and 31st March 2022. 
• Your residential property should not have a stamp duty value of more than Rs.45 lakh. 
• You should not own any residential property on the loan sanction date and should not be eligible for any deduction under Section 80EE. 

You can avail of the benefits enumerated in Section 80EE or 80EEA in addition to those provided under Section 24. 

Section 80C

Under this section, you are eligible to deduct a maximum of Rs.1,50,000 per financial year for the principal amount repaid during the year. However, if you sell your property within five years of acquisition, you will have to pay tax on the property in the year of sale.

Under the same section, you can claim a deduction of up to Rs.1,50,000 for stamp duty and registration expenses. However, these are eligible for deduction only in the year they were incurred.

Conclusion 

All of the information discussed above, including the tax relief that you can avail of, will require you to have a home loan provisional certificate. Securing a home loan may be a better option as compared to investing all your funds towards the construction or acquisition of your home. You can get a home loan sanctioned at a reasonable interest rate from any lender. However, it is imperative to do thorough research before choosing the lender. Once the formalities of sanctioning your loan are concluded, your lender shall provide you with the certificate. With the advent of technology, today most lenders offer the option of downloading it from their website as well. 

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