Whether repayment of car loan can be done before the complete term

In Recovery Law
I am a teacher in a govt. sponsored school in West Bengal & I have purchased a car in October-2015 with the help of SBI Car Loan. My father who is a Senior Citizen owns some agricultural lands. He is planning to sell off the lands & use the proceeds from the transaction to make Early Repayment of outstanding Loan amount to the tune of approx. Rs 6 Lakhs. Please advise on the Legal & Tax implication, if any for myself & my father.

Answers (1)

75 votes

Dear Querist,

1. Nothing stops you from early repayment of loan. The only hurdle is that some bank charges pre-payment charge and some don't. Therefore, please go through the terms & conditions of your loan agreement with SBI.

2. As far as, the tax implication is concerned, it depends on your and your father's earnings. Sale proceeds of agricultural land recorded as agricultural land is exempt from tax in case you have already disclosed agricultural income in your previous IT returns.

However, if one has not declared any agricultural income previously and presently is not keen on giving any tax on the long term gain, then one may keep the sale proceeds upto 50 lakhs in government bonds ( REC, NHAI) for a period of 3 years and would receive 6% interest per annum from such bonds. After the lock in period of 3 years the entire principal amount invested in such bonds would be credited bank to the concerned person's bank account.

In order to give further detailed opinion, all documents relating to the matter are required to be perused.

Sohail Haque

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