Excel for Chartered Accountants
Reverse Mortgage Scheme 2013, Benefit extended till lifetime of the borrower
Under the Reverse Mortgage Scheme 2008, senior citizens who are of sixty years or more can avail periodic payments from approved lenders against the mortgage of his/her house while continue to be the owner and occupy the house. In case of married couples if any of them is of sixty years or more, they can take benefit of the scheme.
The quantum of loan depends on the valuation of property by the lending institutions. The approved lenders notified under the scheme are Scheduled Banks, National Housing Bank or a housing finance company registered with National Housing Board (NHB).
The important point of the scheme is that t he borrower is not required to service the loan during his/her lifetime and therefore he is not required to bother for periodic repayments of principal and interest to the lender. On the borrower’s death or on the borrower leaving the house property permanently, the loan is repaid along with accumulated interest, through sale of the house property. In case of foreclosure of the loan agreement, the reverse mortgagor, or his legal heirs or estate, is liable for repayment of the principal amount of loan along with the interest
Income Tax Benefits
Transfer of property is liable to capital gain tax under Income Tax Act, 1961. However transfer of a capital asset in a transaction of reverse mortgage under a scheme made and notified by the Central Government shall not be regarded as a transfer for the purpose of capital gain tax.
Also any amount received by an individual as a loan, either in lump-sum or in installment, in a transaction of reverse mortgage is not included in computing his/her total income as per Income Tax Act, 1961
A borrower, under a reverse mortgage scheme, shall, however, be liable to capital gain tax only at the point of alienation of the mortgaged property by the mortgagee for the purposes of recovering the loan.
Reverse Mortgage Scheme 2008 Notification >>
Amendment made to scheme by notification 79 dated 7th October, 2013
The new scheme has made the following changes:
After the amendment, the lending institutions, in addition have been authorised to make payment to Life Corporation of India (LIC) or any other insurer registered with IRDA for the purpose of making periodic payments by way of annuity to the reverse mortgagor
Central Board of Direct Taxes (CBDT) by notification 79 dated 07-10-2013 has made changes to the erstwhile scheme. The new scheme shall be called Reverse Mortgage (Amendment) Scheme, 2013.
1. Disbursement of Loan
Under the old scheme, the lending institutions disbursed the loan to the reverse mortgagor through periodic payments or in lumpsum (not exceeding fifty percent of loan sanctioned)
21-10-2013 | CA Ashutosh Lohani |
2.
Period of Reverse Mortgage Loan
Under the old scheme, the maximum period for which loan can be granted is twenty years.
After the amendment, the lending institutions can disbursed the loans for lifetime of the borrower for periodic payments of annuity by insurer registered with IRDA.
Reverse Mortgage (Amendment) Scheme, 2013 Notification >>
