## Reverse Mortgage [Section 47(xvi) read with Section 10(43)]
### What is a reverse mortgage?
A senior citizen mortgages their house property to a scheduled bank or housing finance company (HFC) in exchange for a lump sum or regular income. The borrower continues to live in the house and is not required to repay the loan during their lifetime.
### Key features
| Feature | Rule |
|---|---|
| Loan limit | Up to 60% of the value of the mortgaged house property |
| Revaluation | Property is revalued every 5 years by the bank / HFC |
| Permitted use | Renovation/extension of the residential property, or medical/emergency family expenses — NOT for speculative or trading purposes |
| Disbursement | Lump sum or periodic payments (monthly/quarterly/annually); OR routed through an Annuity Sourcing Institution (e.g. LIC / IRDA-registered insurer) which makes periodic annuity payments to the mortgagor |
| Maximum tenure | 20 years from the date of agreement, or as per annuity terms |
| Recovery of loan | After the borrower's death, loan + interest is recovered by selling the house; any excess is paid to legal heirs |
| Legal heirs' preference | Heirs may repay the loan + interest to reclaim the property before it is sold |
### Tax treatment (two exemptions working together)
- Section 47(xvi): The transfer of the house under a reverse mortgage is not regarded as a transfer → no capital gains tax.
- Section 10(43): The loan amount received (whether lump sum or in instalments) is exempt from income tax.
Memory hook: Reverse mortgage = the senior citizen gets money but pays no tax — neither capital gains (47(xvi)) on giving the house as security, nor income tax (10(43)) on the money received.