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Loans Against Property: Tax Benefits under the Income Tax Act

By IIFL Home Loans | Published On Jul 06 2023 5:56 AM 1 min read 286 views 573 Likes
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Managing the cash flows of your small business can be a daunting task. With pending vendor obligations and delayed client cash streams, it can be difficult to keep up smooth functioning. Upgrading or expanding your operations can be equally challenging because innovations and improvements are complicated and expensive. During a cash crunch, your best option for ensuring the success of your small business is to apply for a loan.

Although taking out a loan to fund your business needs may feel like a drain on your already-strained finances. However, what if your loan could help you save money on taxes? Yes, you read that correctly.

A Loan Against Property is a type of secured loan that not only offers lower interest rates but also helps you save money on taxes. At IIFL Home Loans, our Shakthi Loan Against Property and Secured Business Loan offer funds starting at ₹2 lakhs in only 30 minutes! Our Secured Business Loan is also a kind of LAP that can provide quick access to funds when you need it.

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What is a Loan Against Property?

A Loan Against Property is a secured loan that provides you with funds in exchange for the mortgage on your residential or commercial property. The amount of the loan approved is determined by the valuation of your property. However, to obtain a Loan Against Property, you must have a valid title to the property.

Now that we have covered the basics, let us take a closer look at the tax benefits of Loans Against Property.

Tax benefits of Loan Against Property

Several tax exemptions are available on Loans Against Property under the Income Tax Act, 1961. Here is a detailed summary of the mortgage loan tax benefits:

Loan Against Property Tax Benefits Under Section 24(b):

Section 24 of the Income Tax Act offers you various deductions while computing your income from house property. Subsection (b) of this provision provides an exemption for interest on a Loan Against Property. Therefore, any amount paid by you toward interest on a Loan Against Property is deductible up to a maximum of ₹2 lakhs.

Conditions for availing tax benefits on Loan Against Property under Section 24(b):

Several tax exemptions are available on Loans Against Property under the Income Tax Act, 1961. Here is a detailed summary of the mortgage loan tax benefits:

  • You must provide a certificate from the lender clearly showing the amount of interest payable.

  • Both subsections (a) and (b) are subject to an upper limit of ₹2 lakhs. Thus, if you take a deduction of ₹50,000 under subsection (a), the maximum deduction that you could avail of under subsection (b) would be restricted to ₹1.5 lakhs.

Loan Against Property Tax Benefits Under Section 37 (1):

Section 37 establishes the framework for a generalised deduction provision for all expenses incurred for business or profession. However, such expenses should not be capital or personal. Therefore, availing a Loan Against Property will not qualify as a deduction under this section because it is a capital expenditure. However, under Section 37(1), any interest or fees associated with the loan will be deductible.

How to apply for a Loan Against Property

Now that you know the tax benefits of Loans Against Property, here's how to apply online:

  • Visit the IIFL Home Loans Shakthi Loan

  • Click on 'Apply Now' in the Loan Against Property section to begin the application process.

  • Fill out the online form and your personal information accurately.

  • Upload your identity proof and address proof.

  • Click on 'Submit.'

Our back-end team will review your application and approve your loan in as little as 30 minutes!

Click here for comprehensive stepwise instructions on applying for a Shakthi Loan. You can also explore our Secured Business Loan as an alternative to the Shakthi Loan.

In summary

Taking a Loan Against Property is a safe way to borrow money that will not only allow you the benefit of having funds at a lower rate, but also help you to save taxes on your income. You can use this amount for any number of purposes, from funding your business expansion to keeping up with working capital requirements.

A Loan Against Property can help you fulfil your business dreams while reducing your tax commitment. The income tax benefits of a Loan Against Property can help you save up to ₹2 lakhs.

So, what are you waiting for? Visit IIFL Home Loans and apply for a Shakthi Loan or Secured Business Loan today! You can avail of many benefits like lower interest rates, adaptable EMI alternatives, and mortgage loan tax benefits.

FAQs

1. What is a Loan Against Property?

A Loan Against Property is a secured loan where you can borrow funds by keeping your property (residential or commercial) as collateral.

2. What assets can I pledge for a Loan Against Property?

You can pledge residential or commercial properties, including self-occupied or rented properties, for a Loan Against Property.

3. Can I get tax deductions on a Loan Against Property?

Yes, you can get tax deductions under the Income Tax Act, 1961 on a Loan Against Property in India.

4. Which sections provide tax benefits on Loans Against Property?

Tax benefits on Loans Against Property are primarily provided under Section 24(b) and Section 37(1) of the Income Tax Act, 1961.

5. How much tax deductions can I get under Section 80C for my Loan Against Property?

No tax exemptions on Loans Against Property are available under Section 80C of the Income Tax Act. Under this section, tax deductions are available on the repayment of a Loan Against Property

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Disclaimer: The information contained in this post is for general information purposes only. IIFL Home Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment, etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness, or of the results, etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability, and fitness for a particular purpose. Given the changing nature of laws, rules, and regulations, there may be delays, omissions, or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Home/ Loan Against Property/ Secured Business Loan/ Balance Transfer/ Home Improvement Loan/ NRI Home Loan/ Home Loan for Uniformed Services) loan product specifications and information that may be stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Home/ Loan Against Property/ Secured Business Loan/ Balance Transfer/ Home Improvement Loan/ NRI Home Loan/ Home Loan for Uniformed Services) loan.