Property ownership has its fair share of benefits and drawbacks. On one hand, you have the security of owning tangible assets, whereas on the other hand, the increasing costs of maintenance and other expenses can put a strain on your finances. Among the many financial products available for homeowners, a loan against property (LAP) is a versatile option that can help you access a considerable amount of funds. Additionally, the loan against property tax benefits is another advantage that borrowers can avail of.
Some Hidden Tax Benefits or Deduction on Loan Against Property
When you take LAP, you can enjoy loan against property tax benefits in various aspects, such as the interest fees that you pay, which attract tax rebates under Section 37(1) of the Income Tax Act, 1961. The interest component of the loan can be deducted from your taxable income, reducing your tax liability. This deduction is available for self-occupied, rented, and vacant properties. However, the maximum deduction is Rs. 2 lakh in the case of a self-occupied property. For a rented property, there is no upper limit on the interest deduction.
How LAP Used for Business Purposes
Moreover, if your LAP is used for business purposes, you can claim the interest charges as an expense in your income statement, further reducing your tax liability. However, it is essential to ensure that the loan’s purpose is aligned with the business requirements to claim this benefit.
Besides these, there is another loan against property tax benefits with respect to capital gains. If you sell your property, then the sale proceeds, after adjusting for the indexed cost of acquisition or improvement, are taxable under the head of capital gains. However, if you use this amount to repay your LAP, then the amount is not taxable.
Thus, these loan against property tax benefits can help you save a significant amount of money on taxes, making LAP an attractive option for borrowing funds.
Loan Against Property Eligibility
Understanding the loan against property eligibility criteria can help you streamline your borrowing process and prepare you for potential obstacles that may arise. The following are some of the factors that lenders consider before approving a LAP application:
1. Age:
Borrowers should be between 21 and 60 years of age at the time of loan application (may vary depending on the lender).
2. Property Valuation:
The market value of the pledged property is taken into account by the lender to determine the loan amount.
3. Income and Employment Stability:
Borrowers should have a consistent income source, and stable employment records should indicate their repayment capacity.
4. Credit Score:
A good credit score (preferably above 700) indicates a borrower’s creditworthiness and can help in securing better loan terms.
5. Other Factors:
Other factors, like the borrower’s debt-to-income ratio, existing loans, etc., are also evaluated.
In addition to these, borrowers can also use a loan against property eligibility calculator, which helps determine the loan amount that they are eligible for.
Land Loan EMI Calculator
A land loan is a type of loan used to purchase a plot of land. The loan amount and the interest rates depend on the land’s location and the purpose of the purchase. To calculate the equated monthly installment (EMI) of a land loan, borrowers can use a land loan EMI calculator. This allows them to plan their finances accordingly and avoid any financial burdens.
Loan Against Property Calculator
A loan against property (LAP) calculator is similar to a land loan EMI calculator and allows borrowers to estimate the loan amount that they are eligible for based on their property’s current market value. In addition to this, it also helps borrowers understand the monthly EMI, the interest rates, and the total interest payable on the loan. Using a loan against property calculator can help borrowers compare different loans and select the one that best suits their needs and repayment capacity. In conclusion, a loan against property is a versatile borrowing option that can help homeowners access funds for various needs.
Moreover, the loan against property tax benefits can help borrowers save money on taxes and reduce their tax liability. Understanding the loan against property eligibility criteria, using a land loan EMI calculator or loan against property calculator, and researching different lenders can help borrowers secure the best loan terms and make informed borrowing decisions.
Read more