Leveraging Property Loan Tax Benefits: A Strategic Guide

Property loans are secured loans that usually offer a competitive interest rate and a simple disbursal process for individuals. When applying for such a loan, an individual can save a lot by availing the tax benefits.

Since obtaining these loans can incur extra costs like interest rates, processing fees etc., borrowers should maximise the tax deductions offered by different sections of the Income Tax Act of 1961. This guide covers how an individual can avail the property loan tax benefits and how it will help one to manage their finances.

What are the different property loan tax benefits?

The Income Tax Act of 1961 offers several tax exemptions on loans against property. Borrowers can avail the following property loan tax benefits:

       Tax benefits under section 24(B) of the Income Tax Act of 1961

Salaried individuals who take property loans can claim tax deductions if they use it for purchasing or building a new residential house. They can receive a tax rebate of up to Rs.2 lakh on the LAP interest paid in a specific financial year. During tax filing, the borrower must provide adequate documents to prove that the property loan funds were used for buying a residential property.

       Tax benefits under section 37(1) of the Income Tax Act of 1961

If a borrower utilises property loans for business purposes, they can claim tax benefits under this Section. It allows borrowers to claim a tax rebate on the interest paid for LAP, processing fees, and documentation fees, which they can declare as business expenses. They can report these expenses in the business’ Income & Loss Statement during tax filing, making them eligible for tax relief.

       Tax benefits on top-up loans

A top-up loan involves getting additional credit beyond an existing loan amount. It enables borrowers to access funds exceeding their approved loan limit. When obtaining a top-up loan on a property loan, it is considered a personal loan. However, in cases of a loan against property, since the property serves as collateral, there is no requirement for additional collateral for a top-up loan.

What are the conditions for availing tax benefits on property loans?

Both salaried and self-employed people can avail property loan tax benefits. However, it is vital to consider that one can only get tax benefits if they use these loans for specific purposes.

One can get tax exemption for a loan against property in two cases:

       If they are salaried employees and use the loan to build or buy a new house.

       When one uses the loan for business purposes.

Additionally, remember that one cannot get tax benefits under Section 80C of the Income Tax Act, 1961, even if they are a salaried person using the loan to buy a new home. Most tax deductions and benefits fall under Section 80C and its subsections.

What is the loan against property eligibility criteria?

Here is the loan against property eligibility criteria that an individual needs to fulfil:

       An individual must be an Indian citizen between 25 to 70 years old.

       They must have a CIBIL score of 700 or more to get their property loan approved.

       Applicants must be self-employed or salaried individuals to be eligible for a property loan.

How to use a loan against property EMI calculator?

To use a loan against property EMI calculator, a borrower should follow these steps:

Step 1: Visit the official website of a lending institution.

Step 2: Next, search for the Mortgage loan EMI calculator.

Step 3: Then, enter the loan amount, interest rate, and tenor correctly.

After entering all the values correctly, the calculator will instantly display the EMI on the screen.

Several lending institutions offer pre-approved deals to their trustworthy customers. These offers depend on the individual’s credit score and include financial products like personal loans, home loans, loan against property, etc. Customers can inquire about these offers from the official website of the financial institution by entering the required details.

Secured property loans offer a safe and flexible way to finance your needs. However, the property loan tax benefits rely on how one utilises the loan. One should remember that tax deductions are only for the interest paid on the property loan, not for the amount one repays.

Leave a Reply

Your email address will not be published. Required fields are marked *