A loan against property is a secured loan which applicants can avail by mortgaging land assets. Opting for LAP is a better option since applicants can obtain funds at comparatively lower interest rates than other forms of unsecured credits. Moreover, the credits usually come with longer repayment tenor that eases paying off the debt
Furthermore, borrowers can claim for a loan against property tax benefit on such credits. These benefits are subject to certain conditions and require borrowers to submit essential documents to enjoy the benefits.
Tax exemptions on LAP
Tax benefits on a loan against property primarily depends on the end-use of the disbursed amount. There are two clauses under the Income Tax Act of India that describes loan against property tax benefits. Let’s take a look.
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- Section 37(1) – Borrowers can claim tax exemption against the paid interest as well as all the associated fees and charges if they utilise the borrowed amount for business purposes. These expenses will have to be claimed as business expenses.
- Section 24(B) – Section 24(B) allows a borrower to claim tax benefits if an applicant utilises the borrowed amount to fund the purchase of another residential property. In this case, the maximum tax exemption claimed will have to be within Rs. 2 Lakh.
A borrower will have to show the valid proof for the above mentioned clauses (for Section 37(1) it will be business expenses and for Section 24(B) it will be property acquisition) while filing their Income Tax returns to avail tax benefits on loan against property. After submission and verification of the said documents, the exempted amount will be deducted.
Other than the tax exemptions, loan against property comes with several other benefits that allows a borrower to utilise the amount without worrying about the repayments. These include –
- Hassle-free loan approval
Most reputed financial institutions takes only 48 hours to verify and approve a loan against property application. Once it is approved, the amount is likely to be disbursed within 4 to 5 working days.
- Loan amount
Salaried employees are eligible for a mortgage loan of up to Rs. 1 Crore whereas self-employed individuals can avail a property loan of up to Rs. 3.5 Crore. Such substantial loan amount without any end-user agreement allows mitigating any financial requirements.
- Easy balance transfer facility
Loan against property balance transfer facility allows borrowers to transfer their existing property loans from one institution to another. Moreover, borrowers will benefit from a high-value top-up loan on this facility.
- Low prepayment charges
Borrowers who apply for a mortgage loan at a floating rate of interest can enjoy part-prepayment and foreclosure facilities at negligible charges.
- Flexible repayment tenor
Lending institutions and NBFCs offer an affordable rate of interest on property loan with an extended tenor. Henceforth, the loan repayment period for salaried employees can extend from 2 to 20 years, and self-employed individuals can choose a tenor of up to 18 years.
Moreover, some financial institutions also allow borrowers to withdraw funds as they require, and pay interest only on the amount utilised. It can help save a significant amount of money on payable interest.
Such features and benefits on loan against property is available with several leading financial organisations, including NBFCs like Bajaj Finserv. They have a streamlined application process that is easy and time-saving.
Know how a loan against property is processed by reading the following steps –
Step 1: You have to submit the online application by providing your personal details, information about your current employment, and the property you are mortgaging.
Step 2: A representative will contact you to verify your financial and property details. During the process, your CIBIL score will be checked and based on that a loan offer will be made to you.
Step 3: You will be required to submit your documents like your identity proof, address proof, income proof and property papers in order to validate your application.
Step 4: Once you have submitted all your documents, the lender will verify them. This process includes tallying up your details concerning the application and your document docket. You may also be asked for a face-to-face verification.
Bajaj Finserv also brings pre-approved offers that make the process of availing loans without any hassle. These offers are available on home loans, business loans and personal loans along with several other financial products. You can check your pre-approved offer by providing a few essential details like your name and mobile number.
You can claim for a loan against property tax benefits with the submission of all the essential documents. Make sure you meet the requirements to avail tax exemptions on your property loan.