Your Loan Against Property Comes With These Tax Benefits
Mortgaging your residential or commercial properties against a loan comes with multiple advantages. Both salaried and self-employed professionals with a pre-owned residential or commercial property can avail themselves of such loans.
Consumers access these loans against their properties for a slew of reasons.
These include funding education, paying for medical expenses, funding marriages and family functions, expenses towards home redecoration, and purchasing high-priced consumer durables like fridges and TVs.
Here are the key advantages of taking a loan against property, which is making it a preferred option for consumers over personal loans.
Why Loan Against Property Is Rising In Popularity
- It is much cheaper than a personal loan and the loan against property interest rate is lower.
- The principal amount is up to 60%* of the property cost, hence allowing you to fund larger expenses.
- The applicant can continue to occupy the property after taking the loan.
- Multiple repayment options are available.
- The documentation required is minimal, and consumers can avail a home visit facility.
Key Benefits On Loan Against Property
- Tax benefit under Section 24(B) This benefit is only relevant for salaried individuals. In the case that your Loan Against Property is being used to fund a new residential house, then under Section 24(B), you are eligible for tax deductions up to INR 2 lakhs. However, the tax deductions are only applicable on interest payments and not the principal amount. Additionally, this deduction cannot be claimed if funds are used to transform the property being mortgaged or for any other reasons.
- Tax Benefit under Section 37(1) If the loan goes towards funding expenditures for business operations, then under Section 37(1), you can claim tax benefits on three types of charges – the loan against property interest rate charges, the processing fees, and documentation fees incurred on the business expenditures. It does apply to the principal amount.
Scenarios Where Tax Benefit Is not Available
Consumers mortgage their residential or commercial properties for several reasons, but not all of them are eligible for text benefits.
For example, some of the cases where tax benefits do not apply include when the loan is used to fund medical or hospital expenses, travel expenditures, weddings, and family functions, and to pursue higher education or to fund children’s education.
No Tax Benefits Under Section 80C
Typically, income taxpayers who have taken out a home loan, are eligible for Tax deductions under Section 80. However, this does not apply in the case where you have mortgaged your residential or commercial property to take out a loan to be able to pay for a slew of different goals, from education to medical expenses.
Even though tax benefits apply only in specific scenarios and not on the principal amounts, this category of loan is a great option for consumers. It helps you reap the benefits of leveraging your own property as collateral. It helps you meet a multitude of specific goals by offering flexible options to you, the consumer. The tax benefits are the icing on the cake.