More than 17 million individuals availed mortgage loans in India in the Financial Year 2018 – 19. This number marks a growth of almost 21% in demand for secured loans, mostly councilman against the property for educationsting of loans against property.
Which Sections Allow Tax Exemption for a Mortgage Loan?
Individuals can avail tax deduction on interest paid towards the repayment of a loan under Section 24(b) and 37(1) of the Income Tax Act, 1961. It allows individuals to save considerably on tax obligations depending on the loan amount.
Here is how you can avail tax benefits on loan against property –
- For Businesspersons - Individuals who avail loan against property to facilitate their business finances can enjoy tax deduction under Section 37(1) of the IT Act. The loan against property process dictates that individuals can avail tax benefits on payment of interest as well as associated costs.
- For Salaried Individuals- Such individuals can avail tax benefits on loans against property under Section 24(b), provided that the loan amount is used to purchase or construct a residential property. The maximum deduction available under Section 24(b) is Rs. 2 Lakh.
Note that tax deduction is available exclusively on the aforementioned end usages. In case you avail the loan against property for education, wedding, etc., the IT Act does not allow exemptions on the same.