How to Avail Tax Benefits on LAP Loan?

LAP or loan against property is among the most sought-after credit options. It is the user-intrinsic features and benefits of LAP loan that make it popular among intending borrowers.

For instance, the said credit option extends benefits like - high loan value, comparatively low rate of interest and zero restrictions on end-use to its borrowers. Also, borrowers are entitled to tax benefits under Section 37 (1) and 24 (b) and can claim the same in various ways.

Must Read : LAP Loan

Conditions to avail tax benefits on LAP 

Borrowers can avail tax benefit on loan against property by meeting these conditions.

• If the loan amount is used to meet business requirements, borrowers can claim tax exemption under Section 37(1). However, such exemptions can be claimed on the amount of interest paid and other related charges. 

• Section 24 (b) allows borrowers to claim tax exemption of maximum Rs.2 lakh if the borrowed sum is used to purchase a residential property. Borrowers need to provide substantial proof of use to initiate such a claim. 

Things to remember 

Here are a few things to remember before proceeding with the tax benefit claim –

• Exemptions under Section 37 (1) and 24 (b) can be claimed only on interest paid as per the loan against property interest rate. 

• Claims will not be entertained if the loan amount is used to transform the mortgaged property or to meet personal requirements. 

Therefore, the tax benefits associated with LAP loan make the advance a more feasible funding option. However, before proceeding with the claim, borrowers need to find out which sections apply to them.