A Property Loan is a type where the property is put as collateral for the Loan. In this Loan, the property is mortgaged to the lender. This makes it less risky than a Personal Loan. Such Loans typically enjoy a lower interest rate than Personal Loans. The Loan duration is also higher. This makes it an attractive proposition for someone looking to raise funds from their property.
Both salaried employees and self-employed professionals can apply for such Loans. An important consideration that arises when you opt for Property Loans is the taxes applicable to them. How to pay house tax online? Are there any tax benefits? Let us understand this better.
For a salaried employee, there is no tax benefit on Property Loans. The tax benefits under Section 24 of the Income Tax Act for deduction of interest and Section 80C for deduction of principal amount repaid are available only under Home Loans. Such Loans are not the same as Home Loans. In House Loans, the purpose is to acquire the property. Property Loans have no conditions attached to them.
Also, since both Loans require a clear title to the property, it is impossible to apply for both Loans together. A clear title means that there should not be any existing mortgage existing on the property. When you mortgage the property, the original title deeds get deposited with the bank. One of the documents required to process a Property Loan are the title deeds to the property.
If you are a self-employed professional and are wondering about taxes on Property Loans, then the provisions are the same as those for a salaried employee. Property Loans are considered as part of the Housing Loan, which means the lender does not interfere in the final use of the funds. For a self-employed professional to get a Property Loan with tax exemptions, it must be clearly demonstrated that the funds borrowed have been used for business purposes.
If the Loan amount has been used for personal reasons, then there are no tax benefits applicable. If you have used the funds for legitimate business expansion, then you can claim the interest paid as an expense in your profit and loss account. There are no tax benefits available for repayment of principal to the lender.
If you are seeking a tax benefit on a Property Loan, then consider the mentioned aspects.