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Reverse Mortgage To Be Tax Free In India

National Housing Bank in the last budget notified the reverse mortgage scheme. In this budget, the Finance Minister has proposed to amend the Income Tax Act to provide that reverse mortgage income received by senior citizens would not be taxed as "income". The ministry of finance has made it clear that a loan under a reverse mortgage arrangement would not be considered as transfer of capital, thus making it non taxable under the income tax rules. Reverse mortgage was notified by the housing finance sector regulator, National Housing Bank, last year to ensure financial security to senior citizens, the move was followed by many banks and housing finance companies. As a concept, reverse mortgage is of great value in unlocking the otherwise illiquid asset. Its a relatively new concept in India but quite popular in the developed countries to generate cash flows.

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