Loan Against Property Tax Benefits – An Ultimate Guide

Indian borrowers are some of the best in the world. They always evaluate the various benefits of a loan before signing the application form. The Indian government also encourages Indian citizens to apply for loans by giving several tax benefits that bring down the effective loan costs.

A loan against land property, or mortgage loan, allows you to claim tax deductions under several sections. However, for claiming such tax deductions, you have to fulfil the criteria set by the government.

What Are The Various Tax Benefits on a Loan Against Land Property?

A loan against land property makes you eligible to apply for tax deduction under two Sections – Section 37(1) and Section 24(B). Knowledge about the various tax benefits can bring down the effective loan against property interest rate, as you can save a considerable amount by claiming the deductions.

Here is what you can expect from each Section.

Section 37(1)

You can claim tax deductions under Section 37(1) if you use the loan amount for business expansion. You can claim the tax deduction when you use the money for buying the machinery or equipment necessary to expand your business. You can also use the funds to construct a factory. However, you cannot claim the tax deduction if you use the funds for personal reasons, such as debt consolidation or capital expenditure. Section 37(1) allows you to get tax benefits on the interest paid and other associated charges.

Section 24(B)

Section 24(B) is applicable for salaried professionals. Under this Section, you can get tax benefits on the interest component of a loan against land property. However, you can get tax benefits under this Section only when you spend the loan amount for house construction or purchase. Moreover, the tax benefit is limited to INR 2 lakh every financial year. You may have to show how you used the loan amount for claiming tax benefits under this Section.

Important Points to Remember

Here are the things you need to consider before applying for tax deductions on loan against land property:

1. You cannot claim any tax benefits if you use the loan amount to renovate or repair the pledged property.

 2. You can use the provisions of Section 24(B) and Section 37(1) for claiming tax deductions only on the interest component of a loan against land property and not the principal amount. You may key in details like loan amount, tenure, and interest rate on a loan against property EMI calculator and check the loan amortisation chart for isolating the interest from the principal.

 3. You cannot claim tax deductions if you use the loan amount for personal reasons, such as wedding, travel, hospital expenses, etc.

Check:  Loan Against Property Interest Rates

Conclusion

A loan against land property is a simple-to-apply loan that anyone with property ownership can apply for. You need to contact a lender offering the best loan against property interest rate and place a loan request. Lenders like PNB Housing offer doorstep service where you can conveniently apply for a loan from the comfort of your home. Remember to use a loan against property EMI calculator before availing a loan against land property. The EMI calculator will help you choose the correct loan amount you can align with your financial objectives.

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