A Loan Against Property (LAP) offers individuals a great way to access funds by leveraging the value of their property. However, what makes LAP even more advantageous is the potential tax benefits it offers.
For borrowers in India, LAP can help lower tax liability, especially when funds are used for specific purposes such as business or personal needs like education, healthcare, and construction.
Here’s a breakdown of how you can make the most of these benefits:
1. Tax Benefits on Business Loan Against Property
If you’re using a LAP to finance your business, you’re eligible to claim the interest paid on the loan as a business expense under Section 37(1) of the Income Tax Act. This provision helps reduce your overall taxable income, providing substantial tax relief. It’s an ideal solution for business owners needing capital while seeking tax efficiency.
2. Claiming Deductions for Personal Purposes
For individuals using LAP for personal goals such as higher education or medical expenses, there are no direct tax benefits under sections like 80C. However, if the loan is directed toward property acquisition, construction, or renovation, deductions are available. Under Section 24(b), the interest paid is deductible up to INR 2 lakh if it’s used toward acquiring or constructing residential property.
3. Documentation and Purpose-Based Tax Benefits
Proper documentation is crucial to claim these tax deductions. Ensure you maintain clear records of how the loan amount is being utilized to maximize eligibility for tax benefits. For instance, if you’re using the loan for business expansion, you must clearly outline this in your financial records.
Key Takeaways for Beginners in Financial Planning
For those new to investment, managing tax benefits can be a great start. Diversifying into avenues like LAP can allow you to fund significant investments without draining savings. Considering options like “best stocks for beginners with little money India” may also help in achieving financial growth while maintaining a well-rounded portfolio.
At Divadhvik, we strive to empower you by providing optimal loan solutions. Including LAS (Loan Against Securities) and LAMF (Loan Against Mutual Funds). With strategic partners like Abhi Loans, Tata Groups, and Parimal Enterprises Limited. Services we provide, are designed to help you capitalize on tax-efficient financing options customized to your financial growth.
