4 Ways to Unraveling Tax Benefits on Mortgage Loans in India

When you purchase a home, it is not just an investment in your future, but also an opportunity to take advantage of tax benefits that come along with it. One of the most significant tax benefits in India is the tax break that you can enjoy on interest payments made on your mortgage loan.

Here are four ways you can unravel the tax benefits of mortgage loans in India.

1. Understand the Basics of Mortgage Loans

Before you can start thinking about the tax benefits, it's important to understand the basics of mortgage loans. A mortgage loan is a type of loan in which you use your property as collateral. In India, you can avail of a mortgage loan for purchasing a new property, renovating or improving an existing property. Typically, mortgage loans have a long repayment period, usually extending up to 20-30 years. It is important to note that tax benefits on mortgage loans are available only for loans taken to purchase or construct a residential property.

2. Know the Tax Benefits on Mortgage Loans

Mortgage loan tax benefits can be offered in various way in India. The interest rate paid on the mortgage loan can be claimed as a deduction under Section 24 of the Income Tax Act. You can claim a deduction up to INR 2 lakhs for a self-occupied residential property. In case you have let out the property on rent, there is no limit on the amount of interest that can be claimed as a deduction. You can also claim a deduction for the principal amount repaid under Section 80C of the Income Tax Act.

3. Understand the Tax Benefits on Equity Release

Another popular way to take advantage of tax benefits on property is to take a loan against property, also known as an Equity Release. In this case, your property is used as collateral for a loan. The interest paid on this loan can be claimed as a deduction under Section 24 of the Income Tax Act, like a mortgage loan. However, the amount of deduction that you can claim depends on how the money is used. You can claim a deduction of up to INR 1.5 lakhs if the loan is used to construct or purchase a new residential property. If the loan is used for any other purpose such as business or personal expenses, the maximum deduction is INR 30,000.

Read Also: Understand Features and Benefits of Loan Against Property for Pensioners

4. Consult a Tax Expert

If you're confused about the tax benefits of mortgage loans or equity release, it is always wise to consult a tax expert. They can guide you on the ways to maximize your tax benefits and ensure that you are compliant with the tax laws. Banks and financial institutions offering mortgage loans can also provide you with the necessary details and paperwork that you need while filing your taxes.

In conclusion, mortgage loans and equity release can help you to take advantage of significant tax benefits in India. By understanding the basics of these loans and knowing the tax benefits associated with them, you can make an informed decision about choosing a loan that is right for you.