A loan against property is primarily a mortgage loan that can be availed by both salaried and self-employed individuals when they are in dire need of money. Usually, the interest rate charged on a loan against a property is lower than other financial products, but it varies from one lender to another and the property price.
When talking about the tax benefits on loan against property, borrowers must note that they can avail tax exemptions on this type of loan based on the end-use of the borrowed money.
Tax benefits of loan against property
Both salaried and self-employed individuals can claim income tax benefits on loan against property. When assessing the avenues, it is to be remembered that individuals can only avail tax exemption on the interest paid and not on principal repayments. Following are some of the tax benefits that eligible borrowers can avail:
- Tax exemption under Section 37 (1)
Salaried individuals can avail tax benefits on loan against property under this particular section. If the fund is availed for business purposes, the paid interest and other associated charges, such as processing fees, documentation charges, can be claimed for exemption as business expenses under this section of Income Tax Act, 1961.
- Tax exemption under Section 24
Salaried individuals can avail of income tax benefits on loan against property under this section if the borrower is availing the fund for purchasing a new residential property. Here, individuals can avail tax exemption of up to Rs.2 lakh. However, individuals need to establish a connection between the loan amount and the end-use of the finance.
As already mentioned, individuals can avail tax exemptions on the paid interest and not on the principal repayment. However, borrowers can’t claim tax exemption if the loan amount is utilised for education, marriage, holidays etc.
Apart from these, individuals can also avail high top-up loan value, which is free from end-use restrictions. Moreover, they can also use the amount to fund their personal and professional financial requirements. Borrowers must note that they can avail tax benefits on loan against a property when availing a top-up loan.
Existing loan against property borrowers can apply for top-up loans at affordable interest rates compared to other financial products. The tax benefits on a top-up loan can only be availed if individuals have provided all the necessary documents that substantiate that the top-up loan amount is utilised to develop or purchase a new property.
Further, borrowers can also save a substantial amount by following certain tips, which will help them to ease their repayment procedure.
Tips to save more on loan against property interest rate
Tip 1- Opting for a balance transfer
A balance transfer facility allows borrowers to transfer their outstanding amount on their existing loan against property. To opt for this facility, borrowers need to conduct in-depth research regarding financial lenders in the market and avail the best loan against property interest rate that can significantly reduce EMIs and substantially save on interest costs.
Tip 2- Negotiating with lenders
If an individual has a good repayment history and credit score, he/she can approach a lender and negotiate interest rates. They can ask their lender to levy competitive or affordable interest rates to avoid financial stress during repayment.
Now that borrowers know how they can avail tax benefits on loan against property and save substantial interest amounts, they can also check out the accompanying features and benefits of loan against property.
Features and benefits of loan against property
To meet a wide range of personal and professional expenses, check out how LAP can be a beneficial option for borrowers:
- Eligible borrowers can apply for a large loan quantum in case of loan against property to fund different expenses, irrespective of its utility.
- Individuals can choose an extended tenor of up to 15 years depending on the lender and ease their repayment procedure.
- One can choose to close a loan against a property by making a substantial prepayment. Lenders usually do not impose additional charges on pre-payment.
- Being a secured loan, it comes with an affordable interest rate as compared to other financial products. But one must note that the interest rate varies from one lender to another.
To avail all the benefits mentioned above on loan against property, individuals must ensure meeting eligibility parameters and produce essential documents to ensure a hassle-free repayment. Moreover, existing borrowers can get the benefit of pre-approved offers extended by reputed housing finance companies. These offers are available on a suite of secured and unsecured financial products to accelerate and simplify the loaning procedure and also avoid the hassle of documentation. Individuals can check their pre-approved offers by submitting their essential credentials.
Therefore any salaried or self-employed individuals can claim tax benefits on loan against property, but they must consider the above-mentioned factors to gain maximum benefits.
