A Loan Against Property (LAP) can be a practical way to access funds during emergencies, but did you know it can also help reduce your tax burden? This video will explore these tax implications.
First, we’ll discuss tax savings under the Old Tax Regime. Under Section 24(b) of the Income Tax Act, salaried individuals can claim tax deductions on the interest paid for LAP. The funds should be used for construction, repair, or renovation of a residential property. This allows up to ₹2 Lakhs deduction per year.
Next, you’ll understand Section 37(1), which provides deductions for the interest on LAP if used specifically for business expenses. However, these deductions only apply to the interest portion. We’ll also talk about tax deductions on the principal repayment. This goes up to ₹1.5 Lakhs per year, under Section 80C.
Finally, the video will explore how transferring your LAP to a new lender for a lower interest rate can also impact your tax savings. However, the total deduction cannot exceed ₹2 Lakhs annually across all lenders.
Ultimately, the tax benefits applicable on a LAP depend on how you use the funds. Remember to use these provisions wisely to make your loan a tax-saving ally!
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