Unlocking Property Loan Tax Benefits: A Comprehensive Guide

Loans against property or property loans are loans availed of against a residential or commercial property or land. These loans offer several benefits. To start with, loans against property are secured loans and therefore, draw a low rate of interest. They also come with a long repayment tenor, which makes repayment comfortable and stress-free. The LTV ratio in the case of these loans can go up to 60% to 70% of the pledged asset's value and therefore, one can avail of and utilize property loans to fulfil all kinds of needs and wants. Lastly, property loans come with tax benefits and borrowers can use these tax benefits to save money in every financial year. In this article, we walk our readers through the various loans against property tax benefits.

Tax Benefit Under Section 24b of the Income Tax Act 

Section 24b of the Income Tax Act concerns itself with tax benefits available on the interest component of a home loan. The maximum amount that one can claim under this section of the Income Tax Act is Rs.2 Lakh. 

When borrowers use the loan against property funds availed of to buy another property, they can claim tax benefit on the payments made towards the interest component repayment of their property loan under Section 24b of the Income Tax Act. The maximum limit that one can claim under this section of the Income Tax Act is Rs.2 Lakh. All property loan borrowers must know that if they use the loan money to buy a property, they cannot claim any tax benefit on payments made towards the repayment of the principal component of their home loan under Section 80C of the Income Tax Act.

Tax Benefit Under Section 37(1)

Section 37(1) of the Income Tax Act makes loans against property borrowers eligible for property loan tax benefits if they use the loan money to take care of business expenses. 

For further details click on Property Loan Tax Benefits. 

Tax Benefit on Top-Up Loans 

Loan against property borrowers can claim tax benefits on top-up loans. Top-up loans are loans availed of over and above a loan that one has already availed themselves of. If a borrower avails of a top-up loan on their loan against property and uses the loan money for repair and refurbishment purposes, they can claim tax benefits up to Rs.30,000 in any given financial year.

These are the tax benefits that are available to loan against property borrowers. If you have availed yourself of a property loan and if you use the money to fund a child's wedding or put them through college, you won't be eligible for any home loan tax benefits. In any case, if you have availed yourself of a property loan or a loan against property, it is recommended that you get in touch with a tax expert and talk to them about how you can maximize tax benefits available to you through a loan against property.