Tax Implications of Loan Against Property (LAP)

Learn how a Loan Against Property (LAP) can offer tax benefits under the Income Tax Act. Sections 24(b), 37(1), and 80C allow deductions on interest and principal repayments, impacting tax liabilities. Transferring your LAP to a new lender can enhance tax savings. Utilise LAP wisely for financial and tax advantages.

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Key Takeaways

Section 24(b) allows tax deductions on interest paid for LAP, limited to ₹2 Lakhs annually

Section 37(1) offers deductions on LAP interest for business expenses

Section 80C permits deductions on LAP principal repayment, up to ₹1.5 Lakhs yearly

Tax benefits depend on LAP fund usage, like property renovation or business expenses

Transferring LAP to a new lender can impact tax savings under Section 24(b)

Total deductions across lenders for LAP interest cannot exceed ₹2 Lakhs annually

Frequently Asked Questions
Yes, you can claim tax deductions on the principal repayment of a Loan Against Property (LAP) under Section 80C of the Income Tax Act of 1961. However, this deduction is limited to ₹1.5 lakhs per financial year.
Under Section 24(b) of the Income Tax Act, you can claim a maximum deduction of ₹2 lakhs per financial year for the interest paid on a Loan Against Property. However, the loan must be used for the construction, repair, or renovation of a residential property.
Yes, you can claim deductions on the interest paid for a Loan Against Property under Section 37(1) of the Income Tax Act if the loan is utilised for business expenses.
When you transfer your Loan Against Property to a new lender, the interest paid to the new lender becomes eligible for deduction under Section 24(b). However, the total deduction claimed across all lenders cannot exceed ₹2 lakhs per year.
Yes, there are certain conditions and limitations. The deductions are subject to the end-use of the loan funds, the type of property (residential or not), and the maximum deduction limits specified under the relevant sections of the Income Tax Act.
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