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Tata Capital > Blog > Unlocking the Hidden Potentials: Mortgage Loan Tax Benefits Explained

Loan on Property

Unlocking the Hidden Potentials: Mortgage Loan Tax Benefits Explained

Unlocking the Hidden Potentials: Mortgage Loan Tax Benefits Explained

Mortgage loans or loans against property are among the oldest forms of credit. They can become your financial pillar when business loans, gold loans, or other secured funding options are out of reach. You can use any property, whether commercial or residential, to receive a mortgage loan to help you transform your dreams into reality. This type of loan gives the lender the security that they need while disbursing you the loan amount that aligns with your goals.

While mortgage loans give you easy access to funds, they also make you eligible for certain tax benefits. This blog will highlight everything you need to know about mortgage loan tax benefits, from mortgage loan tax deductions to the points to remember while applying for them.

Mortgage loan tax benefits

A mortgage loan is a type of secured funding wherein you can pledge your property as security to the lender to receive financial assistance for different purposes. These loans are also advantageous in terms of tax savings. Here are the mortgage loan income tax benefits that you can avail of:

1. If you are a salaried individual who aims to build a new property with the loan amount, you can apply for a mortgage loan tax exemption under section 24 (B) of the Income Tax Act, 1961. You can apply for a tax deduction of up to ₹ 2 lakhs on the interest payments.

2. If you are a business owner willing to invest the loan amount towards the growth of your business, you can also claim mortgage loan income tax benefits. Section 37 (1) allows you to claim tax reduction on the interest and processing fees and other charges related to the loan.

Points to keep in mind while applying for mortgage loan tax benefits

Mortgage loans are beneficial financial aid that can help you access a higher loan amount at a lower interest rate while saving tax. However, below are some points to know before claiming mortgage loan tax benefits:

1. The borrower cannot claim mortgage loan tax benefits if the loan is used for funding education, wedding or other personal events, medical expenses or travel. They can only benefit from tax rebates if the funds are used to build a property or meet business expenses.

2. Section 80 (C) of the Income Tax Act of 1961 allows some tax benefits only when you have an existing home loan. Those tax benefits are not applicable on loans against property.

Apply for a mortgage loan to save tax!

Mortgage loans offer borrowers benefits such as access to a large sanction, lower interest rates and flexible repayment tenures. Additionally, you can benefit from tax benefits on mortgage interest under sections 24 (B) and 37 (1). Remember to read all the loan-related documents carefully to understand the terms of your chosen lender properly. It is equally essential to shop around, analyse different lenders, and choose a trusted financial institution like Tata Capital.

Tata Capital provides secured and unsecured loans at attractive interest rates. You can streamline your financial needs with a 100% online application process, quick disbursals and even benefit from our overdraft facility.

FAQs 

1. What are mortgage loan tax benefits?

When you apply for a mortgage loan to build a new property or to meet business expenses, sections 24 (B) and 37 (1) allow certain tax rebates on the interest paid.

2. What is mortgage interest deduction, and how does it work?

Mortgage interest deductions are the tax benefits you can claim with a mortgage loan. You can claim this deduction only when you use the mortgage loan for business purposes or to build another property.

3. Do I need to itemise deductions to claim mortgage loan tax benefits?

No, you don’t need to itemise deductions to claim mortgage loan tax benefits.

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