Availing loans against properties, be the property is residential or commercial, is one of the oldest forms of credit. When a person can’t get a personal loan or business loan, keeping his existing property can get him credit from a financial institute. As the loan is availed against property, there are certain tax benefits that one can enjoy for the same. This article will give insight into the tax benefits on loans against property that are available in India and how one can make use of the same.
પ્રોપર્ટી પર લોન શું છે?
A loan against property is a secured loan where one keeps the property as collateral security for availing a loan. The value of the loan is derived as per the current valuation of the property. A certain percentage, say, for instance, 70% or 80% of the value of the property is disbursed as a loan amount to the applicant. The borrower can get a loan against property income tax benefits as well, unlike other types of loans.
Many people confuse mortgage loan income tax benefits with tax benefits for home entity loans. These two are not the same. The two loans are only different. A home entity loan is a home loan that one avails for building a home. At the same time, tax benefits on loans against property can be availed against loans taken by pledging the property which is already existing.
Tax Benefits under Income Tax Act for Loan Against Property
Tax provision
Income tax implication on a Loan Against Property
કલમ 24(B) હેઠળ કર મુક્તિ
ચૂકવેલ વ્યાજ પર ₹2 લાખ સુધીની ટૅક્સ કપાત
કલમ 37(1) હેઠળ કર મુક્તિ
Rebate on the processing fee, documentation fee, and interest if the loan is used to meet business expenses
– સેક્શન 24(b)
Under this section, salaried borrowers can enjoy tax exemptions of up to Rs. 2 lakhs if they use the loan against property to buy a new residential property. To avail of this tax benefit, the loan must have been taken for the purpose of purchase, construction, or repair of a residential property. If you use the loan to purchase or construct a property, you can claim the deduction if the acquisition or construction is completed within 5 years of taking the loan.
– Section 37(1)
Under Section 37(1), you can claim tax benefits if you’ve taken the loan to meet business expenses. Borrowers can claim rebates on the processing fee, documentation fee, and even the interest paid on the loan amount. These amounts can be claimed as business expenses during the time of filing the claim. However, it’s important that the loan amount is exclusively used for the purpose of the business.
Eligibility criteria for availing tax benefits on Loan Against Property
To understand પ્રોપર્ટી પર લોન પર ટૅક્સ લાભો and determine how to save tax on loan against property, it is important to review the eligibility conditions that must be met, which include:
The loan must be availed from a recognised financial institution or lender operating in India
Loan against property tax exemption is available only on the interest paid, not on the principal repayment
The borrowed amount should be used for eligible purposes such as business expansion, property purchase, construction, or renovation
Interest paid on a loan used for business or professional purposes can be claimed as a deductible expense
For personal use, interest deduction is allowed under Section 24(b) only if the funds are used for acquiring or improving a residential property
The borrower must be the legal owner or co-owner of the mortgaged property
Proper loan statements and proof of end-use must be maintained to claim tax benefits
The loan must be actively serviced during the relevant financial year
Documentation required to claim tax exemptions on Loan Against Property
To successfully claim tax benefits on loan against property and understand how to save tax on loan against property, keeping the correct documents in place is essential, which include:
Loan sanction letter issued by the lender
Loan account statement showing interest paid during the financial year
Interest certificate from the lender to support loan against property tax exemption claims
Proof of end-use of funds, such as bills, invoices, or business expense records
Ownership documents of the mortgaged property, including sale deed or title deed
Construction, renovation, or property purchase receipts, if applicable
Business financial statements when claiming interest as a deductible expense
Income tax returns and computation statements reflecting the loan against property tax exemption claim
Section 37(1) vs Section 24(b): Detailed comparison for taxpayers
Depending on whether a loan supports business activities or residential property ownership, interest deductions fall under different sections, compared as follows:
Basis of comparison
Section 37(1)
સેક્શન 24(b)
આના પર લાગુ
બિઝનેસ માલિકો અને વ્યાવસાયિકો
ઘરની પ્રોપર્ટી ધરાવતા વ્યક્તિગત કરદાતાઓ
લોનનું કારણ
બિઝનેસ અથવા પ્રોફેશનલ પ્રવૃત્તિઓ માટે ઉપયોગમાં લેવાતી લોન
રહેણાંક પ્રોપર્ટી મેળવવા, બાંધકામ કરવા, રિપેર કરવા અથવા નવીનીકરણ કરવા માટે ઉપયોગમાં લેવાતી લોન
કપાતનો પ્રકાર
બિઝનેસ ખર્ચ કપાત
હાઉસ પ્રોપર્ટી કપાતમાંથી ઇન્કમ
પાત્ર રકમ
Entire interest amount, if wholly for business use
Situations where Loan Against Property offers no tax exemption
While a loan against property comes with flexible usage, not all uses qualify for tax exemptions. Here are some situations that don’t qualify for tax exemptions:
-Loan used for non-housing purposes
If you use a loan against property for purposes other than purchasing, constructing, or repairing a residential property, the interest paid does not qualify for tax deductions under the Income Tax Act. The only exception is using the funds for business purposes, for which you can claim rebates by proving the funds were used to meet business expenses.
-Non-qualifying expenses
Although you can use the loan against property funds to meet various financial needs, expenses related to education, marriage, travel, or medical bills do not qualify for tax benefits. Therefore, it’s important to carefully understand the tax benefits and implications to select the best strategy for your situation and make informed decisions.
Mistakes to avoid when claiming tax benefits on Loan Against Property
While claiming tax benefits on loan against property can be an effective way to reduce liability and understand how to save tax on loan against property, certain common errors may lead to rejection of claims, making it important to avoid the following mistakes:
Claiming principal repayment as a deduction, even though only interest qualifies for loan against property tax exemption
Failing to maintain proper loan statements and interest certificates from the lender
Using loan funds for ineligible purposes while still claiming tax deductions
Claiming deductions under the incorrect section of the Income Tax Act
Not retaining proof of end-use, especially for business-related claims
Assuming unlimited deductions for personal use without checking applicable caps
Claiming tax benefits without being the legal owner or co-owner of the property
Missing or delaying loan repayments during the relevant financial year
Summary: Key tax and financial benefits of Loan Against Property
While an income tax rebate on a loan against property is one of the most important benefits of a loan against property, there are many other benefits that one can consider.
-Large sanction: As a loan against property is a secured loan, the amount one can avail as a loan is quite large as around 70% to 75% of the property value can be sanctioned as a loan. So, if someone is looking for a loan for business growth or building a new residential property and is short of cash, then applying for a loan against property will help them get a fast loan along with income tax benefits for a loan against property.
-Lower interest rate: Since the borrower keeps property as collateral, the risk of the lender reduces if the borrower defaults on repaying the loan. This is why the interest rate is also lower for loans against property. So, one can not only enjoy tax benefits for loans against property. So, a loan against property can be used as a two-way sword that helps in saving interest as well as providing tax benefits. The borrower can save a lot compared to other types of loans where large amounts are sanctioned.
-Longer repayment tenure: Another benefit of availing of a loan against property is the longer repayment tenure. These loans can be paid over many years as per the borrower’s preference. Usually, no personal loans or business loans have much longer tenure. Since it is a secured loan, the tenure can be decided at per convenience of the borrower and stretched over many years.
So, a loan against property can be used for tax savings as there are different tax rebates on loans against property. That said, the borrower must consider the use of the funds as that would determine his eligiblity for a loan against property for availing of the tax benefits. Availing of a loan against property from Tata Capital is comparatively easier as it is a secured loan and beneficial for the borrower at the same time for multiple aspects.
ના, પ્રોપર્ટી સામે લોનમાંથી પ્રાપ્ત થયેલી લોનની રકમ કરપાત્ર આવક તરીકે ગણવામાં આવતી નથી. તે એક સુરક્ષિત લોન છે અને તે ઇન્કમ ટૅક્સને આધિન નથી. જો કે, જો તમે લોનની રકમ (જેમ કે રોકાણ વળતર) નો ઉપયોગ કરીને કોઈ ઇન્કમ ઉત્પન્ન કરો છો, તો તે કરપાત્ર હોઈ શકે છે.
શું પ્રોપર્ટી સામે લોન 80C હેઠળ આવે છે?
ના, પ્રોપર્ટી સામે લોન 80C હેઠળ આવતી નથી. સેક્શન 80C હોમ લોન, જીવન વીમો પ્રીમિયમ અને અન્ય નિર્દિષ્ટ ઇન્વેસ્ટમેન્ટની મુદ્દલની ચુકવણી માટે ટૅક્સ કપાત પ્રદાન કરે છે.
પ્રોપર્ટી સામે લોન પર કેટલું વ્યાજ ચૂકવવામાં આવે છે?
પ્રોપર્ટી સામે લોન પરનો વ્યાજ દર ધિરાણકર્તા, લોનની રકમ, મુદત અને તમારી ક્રેડિટ પ્રોફાઇલના આધારે અલગ હોય છે. સામાન્ય રીતે, પ્રોપર્ટી સામે લોન માટે વ્યાજ દરો વાર્ષિક 8 % અને 15 % વચ્ચે હોય છે.
પ્રોપર્ટી સામે લોન માટે કેટલું ITR જરૂરી છે?
મોટાભાગના ધિરાણકર્તાઓને પ્રોપર્ટી સામે લોનની એપ્લિકેશન પર પ્રક્રિયા કરવા માટે કરજદારોને પાછલા 2-3 વર્ષ માટે તેમના ITR સબમિટ કરવાની જરૂર પડે છે. આ ધિરાણકર્તાને કરજદારની આવકની સ્થિરતા અને પરત ચુકવણીની ક્ષમતાનું મૂલ્યાંકન કરવામાં મદદ કરે છે.
શું પ્રોપર્ટી પર લોનને હોમ લોનમાં રૂપાંતરિત કરી શકાય છે?
ના, સંપત્તિ સામે લોનને હોમ લોનમાં રૂપાંતરિત કરવું શક્ય નથી. જો કે, જો તમે ઘર ખરીદવા અથવા બાંધવા માંગો છો તો તમે હાલની લોન બંધ કરી શકો છો અને નવી હોમ લોન લઈ શકો છો.
શું પગારદાર વ્યક્તિઓ ભારતમાં પ્રોપર્ટી સામે લોન પર ટૅક્સ લાભોનો ક્લેઇમ કરી શકે છે?
ના, સંપત્તિ સામે લોનને હોમ લોનમાં રૂપાંતરિત કરવું શક્ય નથી. જો કે, જો તમે ઘર ખરીદવા અથવા બાંધવા માંગો છો તો તમે હાલની લોન બંધ કરી શકો છો અને નવી હોમ લોન લઈ શકો છો.
શું પગારદાર વ્યક્તિઓ ભારતમાં પ્રોપર્ટી સામે લોન પર ટૅક્સ લાભોનો ક્લેઇમ કરી શકે છે?
Yes, salaried individuals can claim પ્રોપર્ટી પર લોન પર ટૅક્સ લાભો if interest is used for eligible purposes, helping understand how to save tax on loan against property.
Is the principal repayment on a loan against property eligible for income tax deduction?
no, principal repayment is not deductible. loan against property tax exemption applies only to interest paid, subject to usage and applicable income tax provisions.
What documents are necessary to claim tax benefits for loan against property under Section 24(b) or 37(1)?
Loan statements, interest certificate, proof of end-use, property ownership documents, and business records are required to claim પ્રોપર્ટી પર લોન પર ટૅક્સ લાભો યોગ્ય રીતે.
શું બિઝનેસ માટે લોનનો ઉપયોગ કરવા વચ્ચે ટૅક્સ મુક્તિમાં તફાવત છે. personal use?
Yes, business use allows broader deductions under Section 37(1), while personal use has limits under Section 24(b).
What are the most common reasons for rejection of a tax benefit claim on loan against property?
Incorrect section claims, missing documents, ineligible fund usage, ownership issues, or claiming principal repayment often lead to rejection when learning how to save tax on loan against property.
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