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If my parents own a property, can they sell it to their children?

Or, is there a law stating that if you are a child or blood relative, you cannot do so as it is just a transfer of name?

If a child can buy the property, can I take a home loan to do so?

Also, is this applicable for buying a piece of land and an already constructed home? Will I get the relevant tax benefits on the loan?

- Manu B

There are no laws that prevent children from buying a property from their parents.

As far as taking a home loan to do so is concerned, the bank will definitely look into the valuation of the deal closely since it could be an accommodation transaction to enable the family to get access to a cheap source of finance.

In any case, getting a home loan should not be problem as in the worst case scenario, the bank will treat it as a loan against the security of an existing property rather than as a loan taken to purchase a fresh property.

If the bank decides to treat it as a loan against property, then the interest cost might be 1%-2% higher than that of a normal home loan and eligibility will normally be restricted to around 50% of the market value of the property or two times your annual income (whichever is lower).

However, if the transaction with your parents is genuinely arms length, you should be able to convince the bank to treat the loan to you as a regular home loan.

Whichever way the loan is treated by the bank, as long as you can prove that the loan was taken to acquire the house property, the tax benefits will be available for the loan repayments.

I took a home loan from ICICI Bank [Get Quote] and am now taking a top-up loan.

ICICI Bank said that they will issue me a letter stating total interest paid and principle towards top-up. Will I be able to get the tax benefit on the top-up loan as well as home loan?

- Sagar Joshi

Tax benefits are available in respect of interest payable on a loan taken to acquire/ construct/ repair/ renew/ reconstruct a house property.

Unless the top up loan is used for any of the above purposes, no deduction is available in respect of the interest payable on such a loan.

In any case, deduction for the principal portion repaid is eligible only for a loan taken to acquire/construct a house property. Hence the principal portion of a top up loan is not eligible for any tax benefits.

Ditto for a home improvement loan.

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