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Are you going in for a loan against property? Do you want to know how you can claim tax benefits while taking a loan against your property? Well, if you do, then this guide will help you find out how you can maximize tax benefits for loans against your property.

There are substantial tax benefits which you can avail of when you take a loan against property in India. Section 80C of the Income Tax Act allows you deductions for a loan taken against your property on the principal portion of the loan up to Rs. 1,50,000 and another Rs. 2,00,000 towards interest paid against the loan under section 24(b). Taking a top-up loan along with your regular loan entitles you to tax savings as well.

Benefits of a Top-Up Loan

If you are an existing home loan customer, you are eligible for a top-up loan. Before applying for a home loan, however, you need to check whether you fulfill the loan against property eligibility criteria. The interest rates are lower on these loans compared to personal loans. While some loans can be used for your daughter’s wedding or a vacation, others must only be used for home repairs and renovation. 

Tax Advantages of a Top-Up Loan

Secured Loans

Top-up loans are eligible for tax benefits only if they are used for:

  • Construction, renovation or repair of residential property.

  • The interest claim limit is Rs. 2 lakhs under Section 24(b). So, if you have claimed Rs. 30,000 for your top-up loan, you can’t claim more than Rs. 1,70,000 on your regular home loan.

  • The property must be self-occupied, not let out.

  • Carry forward of interest over Rs. 2 lakhs over the next eight financial years.

  • No 80C benefits for a loan taken for repairs and renovation.

Points to Remember While Claiming a Deduction

Here are some important things you need to keep in mind:

  • Interest deduction: The interest deduction is on a ‘paid or payable’ basis, so you can claim the deduction even though you have not actually paid it.

  • Purpose of loan: The top-up loan should only be taken for repairs or construction of the house. If the loan is taken for children’s education or marriage, then the deduction is not available.

  • Proof of expenditure: You need to have documentary evidence that the loan was taken for repair or renovation of residential property. This will be part of the loan against property documents required. Ensure that the receipts are filed properly for income tax purposes.

Maximize the Benefits of Your Loan Against Property

Home Loan Online

Now that you know the huge tax benefits that you can avail of by taking a loan against your property, go through the portals of public and private sector banks to find out which one is offering you the best mortgage loan rates.

Before opting for a loan against property, go through the terms and conditions of the loan before signing the agreement. Fulfill your dreams while you take a loan against property and enjoy tax benefits too.


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