Tax benefit opportunities in loan against property you must know

When it comes to saving taxes, a home loan can reduce your tax liability, as can an education loan. A loan against property is a cost-effective borrowing option. However, can a loan against property give tax benefits as well?

Unlike housing and education loans, tax benefits on loans against property are not directly available. However, you can enjoy mortgage loan tax benefits, provided you use the borrowed amount in specific ways.

Potential tax benefits of a loan against property
 

To maximise loan against property tax benefits, you can utilise the loan amount for one or more of these purposes –

• Business purposes –

Section 37(1) of the Income Tax Act says that the interest paid on a loan taken for business purposes is eligible for deduction. As an allowable expense, it reduces the business's net profit, resulting in tax savings on loans. The loan, however, must not be used for the business's capital expenditure.

Apart from interest on the loan, expenses incurred to raise the loan are also eligible as a business expense. This includes registration, stamp duties, and processing and documentation charges for raising the loan.

• House property –

Under Section 24 of the Income Tax Act, tax benefits on a loan against property can arise when an individual uses the loan to construct, purchase, renovate, or repair a house. This includes –

-  For self-occupied house property, interest of up to ₹2 lakhs per annum can be deducted from the annual income

-  For a house that is not self-occupied, the entire interest paid during the financial year is allowed as a deduction

-  Further loans against property tax benefits are in store for purchasing an affordable housing property under Section 80EEA. An additional deduction of ₹1.5 lakhs is available on the interest portion of the loan repayment amount

While home loan principal repayment is allowed as a deduction under Section 80C of the Income Tax Act, it is not available as a property loan tax benefit.

IDFC FIRST Bank Loan Against Property
 

With IDFC FIRST Bank, you can buy a plot or a commercial property or borrow a loan against your rental income, using a loan against property. IDFC FIRST Bank Loan Against Property is available for all properties, be it residential, commercial, or business properties like hotels and godowns. Thus, with IDFC FIRST Bank Loan Against Property, you have a better chance of optimising tax savings.

Once you get your IDFC FIRST Bank Loan Against Property, tax benefits can be explored through business or house property utilisation. Apart from the tax savings, you also get benefits like –

• Up to 20% savings on EMIs
• Loan of up to 80% of property value
• Flexible loan tenure of up to 25 years
• Dropline overdraft facility where interest is charged on utilised amount only
• Loan transfer and top-up loans

Leverage your property
 

Unlock the hidden potential of your property today and maximise the tax benefits from a loan against property through its astute use. Learn more about IDFC FIRST Bank Loan Against Property today.