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How Can You Get Tax Benefits on Loan Against Property?
Posted on Friday, September 15th, 2023 | By IndusInd Bank
On a rainy day, your first instinct may be to turn to your savings. But, what if your financial needs exceed the amount in your savings fund? In such a situation, your property can prove to be your biggest asset. With a loan against property, you may use your residential or commercial property as a mortgage and secure the funds you need.
A secured loan, a loan against property can be used to meet either business expenses or personal ones like education, wedding, and healthcare. Additionally, you are also eligible for tax benefits in certain events when you get a loan against property.
Tax Benefits on Loans Against Property
You can avail of tax benefits on a loan against propertydepending on how you use the loan amount:
- If you are a salaried borrower and you use the loan amount to purchase a residential property, you are eligible for tax benefits under Section 24(B) of the Income Tax Act.
- If you use the loan funds to meet business expenses, you can claim tax benefits under Section 37(1) of the Income Tax Act.
Do note that when you use the loan amount to fund your personal needs like marriage, education and medical uses, you are not eligible for any tax benefits.
Tax Benefits Under Section 24(B)
Under Section 24(B) of the IT Act, salaried individuals can claim tax deductions of up to Rs. 2 lakhs every financial year if the loan amount is used to fund a residential property purchase. Do note, the tax deduction is applicable only on the interest paid for the loan, and not to the principal amount.
To get the tax benefit, you must submit the necessary documents as proof while filing your tax returns. The papers should ascertain that the end use of the loan amount was to fund a residential property.
Tax Benefits Under Section 37 (1)
You can avail of tax benefits under Section 37(1) of the IT Act when you use the loan amount for business purposes. You can claim tax exemptions on the interest charges, processing fees, and documentation fees that you were charged in the event of acquiring the loan. You can claim these charges as business expenses to enjoy tax benefits.
Why Should You Opt for a Loan Against Property?
A loan against propertyis a convenient loan option; you do not need to sell your property or lose ownership to get the loan. You can, instead, unlock the hidden value of your property and get access to a considerable amount by mortgaging your property. You can use this amount to fund your business, purchase a new home, finance your children’s education, or take care of medical expenses.
Moreover, top banks and financial institutions today offer flexible loan repayment tenures for loans against property, extending up to 20 years. Apply for a loan against property online today to take care of your financial needs in a hassle-free manner.
Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.
