Tax benefits can be availed on your mortgage. According to section 37 and section 24 of the Income-tax act, a loan can be sanctioned against your property by pledging your property as collateral. Both banks and other kinds of financial institutions offer their clients home loans and mortgage loans at attractive prices.

The lender for a mortgage loan, the lender will generally offer you up to 70 % of the collateral’s value. This means that if you want to mortgage your house, the bank will offer you a loan of up to 70% of the house’s value. I.e., If your home is worth Rs 1 Cr. you can avail a mortgage of up to 70 Lakh Rupees.

Buying a new home can be a great way to avail of various tax benefits. Something that people talk less about, mortgaging your existing home can be a great way of unlocking the value of your property and using that money to improve your quality of life. A loan against your property can be something that both salaried and self-employed professionals can avail of to raise capital for their other expenditures. But the document requirement of the salaried and nonsalaried person is different. Sone additional document required for the non-salaried person, additional document list will provide by the lender.

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There are two main ways of availing of tax benefits.

  • According to section 37, you can avail tax benefits through the interest paid on your loan against your property, also referred to as mortgage loan. This effectively means that you can take out a mortgage on your home from a financial institution such as a bank or NBFC, and the mortgage loan interest you will be required to pay will be counted as a deduction on your tax returns. One important thing to note about section 37 is that the deductions provisioned in this clause can only be claimed if the funds are used for business purposes.
  • The second way of availing tax benefits is according to section 24(B). Section 24 of the Income-tax Act lets homeowners claim a deduction of up to 2 lakhs — Rs 1.5 lakhs if you are filing returns for the last financial year — on the home loan interest if you reside on the house property. In case the wonder of the home decides to rent the house, the entire interest is waived off as a deduction. The deductions provisioned in this clause via the mortgage loan interest can only be claimed if the funds are used to purchase another residential property.

Conclusion:

As you can see, getting a secured loan in the form of a mortgage can be a great way to free up money to invest in your business and increase your net worth. The exemptions given over here allow you to claim deductions only on the interest paid and not the principal amount. Tax exemptions cannot be claimed if the amount is used to finance personal expenses such as education and vacation