Both salaried and self-employed professionals can benefit from loan against property. Individuals can pledge residential or commercial properties as collateral to borrow funds to meet their financial requirements. For instance, Bajaj Finserv’s Loan Against Property offers a maximum loan amount of Rs. 5 crore for salaried individuals.
Being a secured loan, loan against property offers competitive interest rates compared to unsecured loans. They are long-term commitments with tenors going up to 20 years. For example, Bajaj Finserv offers a loan against property with a tenor up to 18 years to salaried individuals and 14 years to self-employed people.
Additional Read: Fees and charges of Loan Against Property: Explained
Tax benefits from loan against property
A loan against property gives you funds for your varied needs; you can also claim tax exemption on the interest paid for availing of the loan. Here’s how you can save your tax with a loan against property:
- You can claim tax exemption from a loan against property if the loan amount is utilised for business purposes. In such cases, benefits can be claimed against interest paid and associated fees and charges incurred. These payables can be claimed as business expenses under Section 37(1) of the Indian Income Tax Act.
- Salaried individuals can also claim benefits under Section 24(B) of the Income Tax Act if the borrowed funds are utilised for funding the purchase of another residential property. The maximum deduction one can claim is Rs. 2 lakh. However, you will only be allowed to avail of the benefits if you could successfully establish a link between the borrowed funds and their end-use in accordance with Section 24(B).
- You can’t claim tax benefits if you are utilising the funds to transform the mortgaged property.
- Both Section 37(1) and Section 24(B) enables you to claim deductions only on the interest paid and not on the principal repaid.
- You can’t avail of tax exemptions if the borrowed sum is utilised to fund personal expenses like marriage, education, vacation, etc.
- Unlike home loans, you cannot claim tax exemption from loan against property under section 80C, as under this section, an individual can only claim exemption against entirely constructed residential properties.
Thus, a loan against property apart from providing funds for varied needs also helps you save on taxes.
Additional read: How to apply for a Loan Against Property: A step by step guide
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