Mortgage Loan Tax Benefits under Income Tax Act

January 13, 2022

A Loan Against Property is a secured advance amount that users get against their mortgaged commercial or residential property. This amount of funds is not restricted to being used for a certain purpose but can be used for any requirements including daily expenses. 

Such loans can be extended to tenor, which is why this loan is known to be an affordable option for many. 

This amount can be used for many purposes that include your daily expenditure or even specific expenditure such as: 

  • Education
  • Home Renovation
  • Wedding
  • Debt Repayment
  • Business Purposes

With a mortgage loan comes the tax that needs to be paid. Hence, the most frequent question asked is will an individual be able to avail any mortgage loan tax benefits? Mortgage loan tax benefits can be availed from 

Read on to know what the tax benefits are that one can avail of if opted for Loan Against Property and also understand the different sections and property tax rebate on the same. 

Loan Against Property: Features

  • High-Value of Funding’s
  • Fast Loan Approval
  • Fast Loan Disbursal
  • Easy Transfer Facilities
  • Long Repayment Tenure
  • Quick Processing

Can I get Tax Benefits on a Loan Against Property?

A Loan against Property is permitted for a property that has been kept as a mortgage with the bank. The respective financial institution then decides the amount of loan that they can lend depending on the market value of your property. Usually, a finance house lends about 70% of the market value of the property as a part of the loan amount. 

However, mortgage loan tax benefits depend on the end purpose of the loan amount taken.

Following are the various tax benefits one can avail under different circumstances:

Tax Benefit Under Section 24(B)

The tax benefit under section 24(B) helps the salaried person to take the advantage of the benefits offered. The user is entitled to INR 2 lakhs as part of tax deduction in case the amount of loan against property is taken for the purpose of the advancement of your residential house. The interest payments are then permitted for tax withdrawal. 

Tax Benefit Under Section 37 (1)

This tax benefit under section 37(1) emphasises on expenses and not any kind of income for many users who believe it to be. Therefore, if there are any kind of expenses that are related to the business dealings and not used for your personal or any kind of capital expenses that are showcased in your income statement or even loss statement.

Normally, a LOP is non-tax-deductible, despite the purpose of the mortgage loan – either professional or personal reason. This is because the investment is done for the property against money when one opts for a home loan. Hence, the loan then taken is tax-free. The same thing is also applicable for business entities that took loans for investing in commercial assets. 

No Exemptions of Tax Benefits for Different Scenarios

Even after the cases mentioned above where a user can exempt themselves from paying tax, there are still some scenarios that offer no exemption to the user from paying taxes, these scenarios include: 

  • Loan of Education
  • Marriage
  • Medical Expenses
  • Travelling Purposes

There are still many sections under Section 80C that permit the users to claim for tax benefits. This section allows you to avail tax benefits even if your current house loan is active. However, this Section 80C does not allow any kind of tax benefits for ‘Internal Revenue Code.’

FAQs

How to show a loan against property in Income Tax?

A user can easily claim for exemption of tax from their loan in case the loan against property amount is used for the purpose of business. Under such situations, the claim is availed for interest paid along with fees & charges associated with the same property. And a user can claim the same under Income Tax Act 37(1).

Is the loan against property tax deductible?

No, the loan against property is non-tax-deductible regardless of the purpose of the property. Which could either be personal or commercial use.

Can I avail tax benefits on a loan against property?

Yes, a user can avail of tax benefits on a loan against property. However, you cannot avail such benefits under Section 80C.

Does a customer get a property tax rebate under sections 80C and 24 for a loan against property?

A customer does not get any property tax rebate under Section 80C. Whereas, a customer can avail tax benefits on the interest section of the payment made of the loan even when the user hasn’t made payment for the actual amount of the home loan.

What is a loan against property?

A loan against property is a secured advance amount that a user gets against his/her mortgaged commercial or residential property. It is not restricted to being used for a certain purpose but can be used for any purpose that even include your daily expenses.

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