What Tax Benefits can you Avail through a Loan Against Property?

tax

As the name suggests, a loan against property in India is a secured loan that gives you access to a high-value amount at a nominal interest rate. In order to get a sanction that runs in to lakhs or crores you will have to pledge an equally valuable property as collateral. You can pledge an array of properties to raise funds via an easy loan against property eligibility criteria. Here is the list of properties that most lenders accept.

Self-occupied residential property
Rented residential/commercial property
Vacant residential/commercial property
Shared property

Loan Against

A loan against property is an ideal financing option t to meet a range of personal and professional requirements. You can attend to versatile needs like buying equipment for your factory, investing in business expansion, purchasing a retirement home, financing your child’s wedding or overseas education, and do much more with funds from this loan. However, apart from these benefits, taking a loan against property in India will also qualify you for certain tax benefits.

As per the Indian Income Tax Act the exemptions that you can claim depend on the way you use the funds from this loan. If you use it for purposes that allow exemptions then you can enjoy loan against property tax benefits.

Here is a list of scenarios when tax benefits are available to you.

Using the Loan to pay for your Child’s Education

Under Section 80E of the Income Tax Act you can claim deductions for the interest of the education loan you are repaying and no maximum cap is levied here. However, the principal repayment isn’t subject to a deduction. So in case you have taken a loan against property to fund education for yourself, your spouse, your children, and for any child for whom you are a legal guardian, then the tax benefits of the education loan apply.

Using the Loan for Business Purposes

If you avail a loan against property and then invest the money from this loan for development of your business, then the interest you repay on the loan is regarded as a business expense. So, while filing your business IT you can list this and claim a deduction from your gross business revenue for that year as per Section 37(1). You can also claim incidental expenditures such as on processing fees, document charges, etc. under this section. This will automatically reduce the taxable profit for your business and will in turn bring down your tax liability for the financial year.

Using the Loan to Buy or Construct a Residential Property

Under Section 24 of the Income Tax Act you can claim deductions with regards to the interest that you pay on a loan you take to purchase or construct a residential property. So, if you use the funds from your loan against property to fund a home purchase or construction then you can claim an exemption of up to Rs. 2 lakh towards interest repayment for your self-occupied property. Here, in order to claim this exemption the property you are buying or constructing should be completed within 5 years. Note that you can only claim up to Rs. 30,000 in case the construction gets delayed. On the other hand, if you are not occupying the property yourself, there is no limit on how much you can claim as an exemption, regardless of the status of construction.

Now that you know how beneficial a loan against property can be, add more convenience to your borrowing experience by choosing to take Loan Against Property from Bajaj Finserv. This loan gives you up to Rs. 3.5 crore at a competitive interest rate with a comfortable repayment tenor up to 20 years. To save money you can also take advantage of the Flexi facility. Here, you can withdraw what you need from your total sanction and pay interest only on what you actually use, rather than the entire amount. This helps you save on interest. Further, you can choose to pay interest-only EMIs and repay the principal at the end of the tenor.

Convinced by these features and benefits if you decide to apply for a Loan Against Property from Bajaj Finserv then all you have to is check the loan against property eligibility criteria and apply by qualifying for it. This procedure is fast and easy as you can apply by submitting a simple online application form. Then, for further approval and verification you will have to submit a few documents required for loan against property after which you will get your loan sanction within 48 hours.