You are mortgaging your property in exchange for a loan to further your dreams – to create a moment of joy. But did you know that there is a hidden advantage of tax benefits that this offering brings to the table?
Well, we suggest you read this article to know all about the tax benefits you can avail while on your journey to success. You can thank us later!
Tax benefits of Loan Against Property depend on its usage. Let’s see the various sections under the Income Tax Act, 1961 that make you eligible for so.
If you avail Loan Against Property to buy a new home, you are entitled to receive a tax benefit of up to INR 2 lakhs. The deductions are allowed on the interest you pay on monthly EMIs. In other words, the interest component of the EMI is eligible for deduction.
Often Loan Against Property is availed to serve business needs. The good news is that if you do so, you are eligible for tax benefits. You can claim benefits on the interest paid, processing charges, and documentation charges incurred as business expenditures.
Note that sections 24(b) and 37(1) make you eligible for tax benefits on the interest paid and not on the principal amount.
As the usage of Loan Against Property is vast, using the funds for fulfilling needs, other than housing or business, doesn't qualify for tax exemption. You will not receive any tax benefits if you use the funds for personal expenses such as:
Hence, to obtain Loan Against Property tax benefits, you must ensure not to use the funds for fulfilling the above-mentioned personal needs.
The eligibility criteria for Loan Against Property differs across lenders. You will find the details on the website of the lender you choose. There are a few essential aspects that you need to consider before applying apart from the rate of interest.
Loan Against Property rate of interest is generally on the lower side as it’s a collateral-backed loan. Along with the rate of interest, parameters you need to gauge are:
The lender’s reputation
Processing and documentation fees
Customer service capabilities
Ease of documentation and disbursal time
Property’s value disbursed as loan
Once you are satisfied with these aspects, go ahead, and apply. Most lenders have taken the application process online, where you need to fill up the application form and upload the relevant documents related to KYC, income, and the property you are mortgaging.
Fill up the application form with accurate details as any wrong information can lead to your application being rejected.
Godrej Capital is the financial services arm of Godrej Group which offers home loans, Loan Against Property and other secured loans. With innovative products and offerings, customers can get hassle-free loans on easy terms and conditions. Click here to know more about the offering.
Also Read: Common Mistakes to Avoid While Borrowing LAP
Disclaimer: The above information is for illustrative purpose only. For more details, please refer to the product or service document and/or connect with our customer representative prior to making any financial decision.