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Your Guide to Tax Benefits on Loans Against Property
Posted on Wednesday, September 27th, 2023 | By IndusInd Bank
A loan against property (LAP) is a versatile financing solution that can be used to fund both business and personal expenses. Borrowers must pledge either a residential or commercial property as collateral to get a loan against property. Certain tax benefits on loans against property can also be enjoyed by eligible borrowers. Under Section 24(B) and Section 37(1) of the Income Tax Act, borrowers can claim tax deductions on interest payments, up to a limit, in a given financial year. Choose IndusInd Bank’s flexible LAP solutions to fund a diverse bouquet of financial needs.
A loan against property (LAP) is a versatile financing solution that can be used for diverse purposes – funding business growth, consolidating debt, covering medical expenses, funding higher education, or constructing a new property. Borrowers can pledge different types of properties to avail of a loan against property, including residential and commercial ones. These include houses, apartments, offices, shops, etc.
Unlike unsecured loans that do not require collateral, a loan against property is a secured financing option wherein the property pledged serves as collateral. This allows borrowers to access substantial funds at more competitive interest rates than those offered by unsecured loans. Do note that the property put up as collateral by the borrower must be free from legal disputes or encumbrances. Its value and condition play a key role in determining the final loan amount offered by the lender.
When borrowers are unable to secure funding from other sources, an LAP can prove to be an excellent option for an urgent financial need. Apart from helping borrowers meet personal and business needs, a loan against property also has potential tax benefits to offer.
Tax Benefits on Loans Against Property
Tax Benefits Under Section 24(B)
As per section 24(B) of the Income Tax Act, 1961, salaried individuals can enjoy a tax benefit on a loan against property if the amount is used to fund a new residential property. Under this provision, the borrower can claim tax deductions of up to INR 2 lakhs on the interest paid on the LAP within a financial year.
Tax Benefits Under Section 37(1)
Section 37(1) of the Income Tax Act, 1961, allows for tax benefits on a loan against property if the loan amount is used for business purposes. The borrower can claim a tax deduction on interest charges, processing fees, and documentation fees. It is crucial to maintain proper records that demonstrate that the loan was genuinely used for business purposes to claim such deductions under Section 37(1).
Note that tax benefits on a loan against property cannot be claimed if the loan is used for non-residential purposes such as education, wedding, travel, etc.
Unlock Your Property’s Value with IndusInd Bank
A loan against property is an excellent financing option for borrowers to meet a variety of big-ticket needs. IndusInd Bank brings you flexible LAP solutions to unlock your property’s hidden value, and meet both your personal and business needs. These multi-purpose loans give borrowers access to substantial amounts, and can be comfortably repaid over longer period of upto 20 years.
IndusInd Bank also offers easy-to-meet eligibility criteria wherein the following constitution borrowers can get a loan against property with the bank:
- Individuals/proprietorship concerns
- Partnership firms
- Private limited companies
- Closely held public limited companies (not listed on any stock exchange)
IndusInd Bank also provides customers a convenient doorstep service to get a loan against property at speed. For comprehensive information about loans against property, and to explore IndusInd Bank’s offerings, visit the website today!
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.
