A mortgage loan can be applied by both salaried & self-employed/self-employed professionals against the pledge of their self-owned, vacant, or rented residential, commercial, industrial & land property in India. It is also commonly referred to as a loan against property (LAP). A non-resident Indian (NRI) can also apply for a mortgage loan in India.
The mortgage loan amount can be used for a variety of personal and professional needs. Since it is backed by a security, these secured loans offer competitive interest rates for loans against property starting from 7.50%* p.a. in comparison to the unsecured loans such as personal loans and business loans. Being secured in nature mortgage loans are long-term commitments with repayment tenures going up to 20 years. Qualifying for a mortgage loan is easy and simple. The lenders have different parameters/ loan against property criteria to calculate the mortgage loan eligibility, most common among them are the LTV, FOIR & CIBIL. (Also read- What do you mean by loan eligibility)
Also Read: How to apply for a mortgage loan online.
Another important factor that remains unknown to many mortgage loan applicants is that in addition to availing of a LAP loan they can also enjoy the benefits of mortgage loan deduction in income tax. Let’s look at some of the key mortgage loan income tax exemptions.
Mortgage Loan Income Tax Benefits
Mortgage tax benefits can only be claimed provided the end-use of the loan is justified and is adequately documented. The end-use is the purpose why a mortgage loan is availed, which is broadly categorized into personal use & business use. Moreover, unlike home loans where the tax rebate is enjoyed on both the principal repayment and the interest amount paid, in mortgage loan tax exemptions can be claimed only on the interest paid amount and not on the principal repaid. Hence unlike home loans, the mortgage principal tax deduction cannot be enjoyed for the principal repayment under section 80(C) of the Indian Income Tax Act, 1961.
Mortgage Loan Tax Deduction On Interest
- Claim Mortgage Loan Interest Deduction Under Section 37(1)
If a mortgage loan is availed to help boost up the business and for a variety of business purposes such as business expansions, business promotions, marketing, advertising expenses, etc. the interest paid along with the other charges and associated fees such as the processing fees, documentation charges, administrative charges or legal & technical cost, etc. can be claimed as business expenses under section 37(1) of the Indian Income Tax Act, 1961.
- Claim Interest On Loan Against Property Tax Benefits Under Section 24(B)
If a mortgage loan is availed to develop or buy a house or to carry out repair and renovation work in the house such as painting, refurbishing the kitchen, bathroom plumbing & tiles work, etc. the interest amount paid can be claimed under section 24(B) of the Indian Income Tax Act, 1961 for a maximum mortgage loan interest deduction limit of up-to 2 lakhs in a year.
To avail the mortgage interest deduction taxes it is important to maintain a proper register or entry which must be documented with proofs such as receipts, bills, and invoices, etc. suggesting the loan amount has been utilized only for the said purposes.
- No mortgage loan interest tax deductions will be available if the LAP amount is utilized for personal uses such as marriage expenses, children’s education, travel holidays, medical bills, repayment of credit bills, etc.
Click to get mortgage documentation for the salaried and self-employed individuals.
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