The newly-released data from The Economic Times states the Indian consumer loan market is continuing to expand from the past year, thanks to the exponential growth in the major secured lending categories like loan against property, home loans, etc. The credit market grew 31.3% within Financial Year 2018-19.
This healthy level of growth demonstrates that the secured credit demand by customers will remain strong in the next few years as well. This has prompted reputed lenders to make advances like loan against property available to prospective borrowers to meet this increasing demand.
An Overview of Mortgage Loans in India –
- 17.1% to 21.8% – Growth in secured lending options such as loan against property between FY 18-19.
- 17 million – Number of Indian loan seekers availed mortgage loans in FY 2018.
- 60% – Spike in lending since the nation hit a recession back in 2009.
- 40% – Increase in profits from secured lending within FY 2018-19.
The country’s leading financial institutions and NBFCs have witnessed this growth trajectory, prompting them to offer mortgage loans at lower interest rates to maintain the steady influx of customers.
To make the advances more affordable, you can also avail tax benefits on your loan against property. So, in case of loan seekers enquire is mortgage loan interest tax deductible in India, they should know that such exemptions are considered under the Income Act. This enables borrowers to save on the payable tax amount.
How to Avail Tax Deductions on Mortgage Loans?
Keep in mind, Section 24 (B) and Section 37 (1) of the Income Tax Act enables one to claim tax deductions on the interest paid only and not on the principal repaid. Here is how loan against property process for tax exemptions work –
 Borrowers can claim tax deductions provided the loan against property is utilised to start a business. In such circumstances, tax benefits can only be claimed against the interest paid along with the associated charges and fees incurred. Under Section 37 (1) of the Income Tax Act, such payables can be claimed as part of business expenses.
 Salaried professionals can claim tax benefits under Section 24 (B) of the Income Tax Act as well – provided the borrowed credit is utilised in funding the purchase of a residential property. Keep in mind, one can claim a maximum deduction of Rs. 2 Lakh. You are required to successfully establish a link between the funds borrowed and their end-usage in accordance with Section 24 (B) to be allowed to enjoy tax benefits.
Exceptions in Tax Deduction on Mortgage Loans
However, if want to know is mortgage loan interest tax deductible in India under Section 80C, one cannot claim exemptions from a loan against property. Besides, you are not allowed to claim tax exemptions by mortgaging residential property for a LAP. Furthermore, one cannot claim tax deductions if the borrowed credit amount is utilised for personal expenses such as a wedding, vacation, higher studies, etc.
Now that you know how to avail tax benefits on your loan against property, avail one from lenders such as Bajaj Finserv. This can fetch you a hefty sum of up to Rs. 3.5 Crore at competitive interest rates. Besides, loans against property are long-term commitments with repayment tenors ranging from 18-20 years, making it affordable. This will further economise your loan against property process of availing.
In case you are an existing buyer, you can also benefit from their pre-approved offers. These pre-approved offers are applicable on unsecured and secured credits like personal loans, business loans, home loans, etc., among numerous other financial products. You can check out your pre-approved offer by sharing only a few necessary details like your name and contact number.
Things to Keep in Mind About Tax Exemptions
Tax deduction on your loan against property can potentially make procurement of this secured advance less expensive. It can also help in formulating certain strategies such as debt consolidation.
However, tax exemptions come with limitations as well. So, if one considers is mortgage loan interest tax deductible in India for investors, it is not. Such benefits are not applicable to investors who own dozens of properties for investment purposes. If a property is rented out, used it as an office or a co-working space – tax exemptions are not applicable.
To qualify for tax exemptions, the credit amount must be either for your first or second residential property. These include –
- Home loans for your primary mortgage.
- Home equity loans that provides you with a lump-sum cash for your second mortgage.
Also note that, claiming tax deductions improperly can be a problematic business. It could lead to tax penalties and incur further charges from the Income Tax Department. This guide on mortgage interest tax deduction will help you to avoid such issues.