Save More Today Tax! Avail Top Benefits on Loan Against Property

Owning property is a dream come true for many of us. However, it also comes with a lot of financial responsibilities. But did you know that owning property can also bring with it some great financial benefits? Yes, loan against property tax benefits can help reduce your tax liability and save you more money. Keep reading to find out how you can avail of these benefits and save more tax today.

What is a loan against property?

A loan against property is a type of loan where you pledge your property as collateral to avail of the loan. The value of your property is considered while sanctioning the loan amount. The loan amount can be used for personal or business purposes, as per your preference. The interest rate on a loan against property is generally lower than that on unsecured loans like personal loans or credit cards.

Mortgage loan tax benefits

When you avail of a loan on property, you are eligible for certain loan against property tax benefits under the Income Tax Act, 1961. Here are the top tax benefits that you can avail of:

1. Tax deduction on interest paid

If you have taken a loan against property for home renovation or for business purposes, you can claim a tax deduction on the interest paid on the loan. You can claim a deduction of up to Rs. 2 lakhs per annum under Section 24 of the Income Tax Act, 1961.

2. Tax deduction on principal repayment

The principal amount that you repay towards your loan against property is also eligible for tax deduction under Section 80C of the Income Tax Act, 1961. You can claim a deduction of up to Rs. 1.5 lakhs per annum on the principal amount of the loan. However, if you have availed of a loan against property for business purposes, you cannot claim a deduction on the principal repayment.

3. Tax benefits on rent received

If you have availed of a loan against property for purchasing a property that is let out on rent, you can claim a deduction on the interest paid on the loan. The entire interest paid on the loan is allowed as a deduction from the rental income received, under Section 24 of the Income Tax Act, 1961.

4. Tax benefits on prepayment of loan

If you choose to prepay your loan against property, you can claim a tax deduction on the prepayment charges under Section 24 of the Income Tax Act, 1961. This deduction can be claimed in the year in which the prepayment charges are paid.

How to avail of mortgage loan tax benefits?

To avail of loan against property tax benefits, you must ensure that you fulfill the following conditions:

1. Property ownership

You should own the property for which you are availing of the loan against property. If you have inherited the property, you should ensure that your name is updated in all the relevant documents.

2. Purpose of loan

You should ensure that the loan against property is taken for a valid purpose, such as for home renovation, business expansion, or purchasing another property.

3. Documentary evidence

You should maintain proper documentary evidence of the loan against property and the interest paid on it.

4. Repayment of loan

You should ensure that the loan against property is repaid on time, as per the terms and conditions of the loan agreement.

Read Also: Understand Mortgage Loan: How Can You Become Eligible for It

Conclusion

Loan against property tax benefits can help you save more money and reduce your tax liability. If you own a property and need funds for personal or business purposes, availing of a loan against property is a great option. The interest rates are lower than those on unsecured loans, and you can also avail of tax benefits on the interest paid and principal repayment. However, you must ensure that you fulfill all the conditions to avail of these benefits. So, go ahead and explore the loan against property option and save more tax today!