Home » Did You Know About These 3 Income Tax Benefits on Property Loans?

Did You Know About These 3 Income Tax Benefits on Property Loans?

by janeausten
Did you know about these 3 income tax benefits on property loans?

A loan against property is an advantageous economic recourse that enables real estate owners to use it as collateral to secure funding from a financial institution. It should also be noted that a borrower can also enjoy certain tax benefits on interest on a loan against property. 

3 income tax benefits on loan against property

Here are the top 3 available income tax exemptions that borrowers of LAP can enjoy:

  1. Tax benefits under Section 37(1)

Specific provisions under Section 37(1) of the Indian Income Tax Act can favour LAP borrowers. To elaborate, this section entails that an applicant can be eligible for a tax exemption on his/her interest paid if the sanctioned credit amount has been utilised for business expenses. 

  1. Tax benefits under Section 24(B)

As per Section 24(B) of the Indian Income Tax Act, a borrower can claim tax benefit on the interest paid for the loan against property if the sanctioned credit amount has been utilised for buying a different property.

Notably, the highest limitation of claimable deductible amount accounts for Rs.2 lakh. Nevertheless, the applicant must produce adequate documentation to establish that the credit borrowed has indeed served the end-use purpose of a second property purchase. 

  1. Tax benefits regarding top-up loan 

During an ongoing repayment schedule, a borrower can consider refinancing his/her loan if a different financial institution offers more preferable lending terms. This procedure of transferring the outstanding debt to another lender is referred to as a LAP balance transfer

Therefore, if an applicant chooses such a refinancing option, he or she can enjoy substantial tax relief on the interest rate on producing the necessary paperwork. 

Other than these tax benefits, there are several other features of loans against property that can benefit borrowers. So, when they apply for the best property loan, applicants must keep such aspects in mind. 

Features of loan against property 

Some of the most beneficial aspects of LAP include:

  • Competitive interest rate 

As this is a secured line of credit, the lenders generally consider the borrowers to be at a lower risk of default. That is why they can avail the loan at competitive rates. For example, the leading financial institutions in India offer property loans at an interest rate of around 9.50% per annum. 

A lowered interest rate can significantly reduce the total repayment outgo of a borrower. Moreover, a lowered interest loan can significantly bring down the EMI expenditure for the borrowers. As a result, they can avoid missing a payment and prevent their CIBIL score from getting negatively impacted. 

  • Extended repayment tenor

Another pivotal way of reducing the EMI is by opting for a longer loan term. Notably, some of the leading financial institutions of this country allow borrowers to opt for a loan against property for a tenor of up to 18 years.

However, a longer tenor can also lead to added spending in the total interest outgo amount. So, borrowers must conduct substantial background research to determine which option suits their financial goals. Interestingly, they can use the EMI calculator on a lender’s website to customise these variables and check the ideal permutation for them. 

  • Continued property ownership of an applicant

Even as the borrowers pledge their property as collateral for the loan, this financial tool ensures that they have the ownership and right to use the mortgaged property without restrictions. 

To enjoy these benefits, a borrower must ensure he or she is eligible for the desired credit amount. Otherwise, a rejected loan application can significantly reduce his/her CIBIL score. So, it is best to use the property loan eligibility calculator on a lender’s website to check the upper limit of credit amount they can avail.

Keeping these aforementioned things can lead to a hassle-free repayment experience for the borrowers. Additionally, several tax benefits on interest on loans against property can help them limit excessive expenditure to maintain a steady financial discipline. 

Related Posts

MarketFobs is an online webpage that provides business news, tech, telecom, digital marketing, auto news, and website reviews around World.

Contact us: marketfobs.com@gmail.com

@2023 – MarketFobs. All Right Reserved.