Tax Benefit from Loan

Loan is offered by various financial institutions. The loan which is obtained is exempted from tax under certain cases.

Tax Benefits from Loan are available in various cases which has been described below:

• Tax benefit on the purchase of plot of land- If a loan is taken for the construction of house, on that plot of land the person can get tax benefit from loan. In this case, the tax benefits are available on both the loans - purchase the loan and construction of house. Tax benefit on the entire loan amount is provided.

• The tax deductions will be applicable only in the year in which the construction is completed. Under Section 80C, the repayment of the principal amount (principal amount is the actual amount that is borrowed and does not includes interest) that is made on the home loan eligible for income deduction under Section 80C.

• Under Section 24, in case of self- occupied house, the maximum amount of interest deduction from ones income is Rs.150000. subjected to the fact the construction of the house is completed within three years.

• Educational loan with Tax benefit- Various Banks provides educational loan to the students which is supported by tax benefits at the time of repayment. Loan amount covers college fees, hostel fees, examination fees, books, equipments, travel expenses etc. To be eligible for this loan the a student should possess good academic records, his or her parents should have stable source of income etc

• Tax benefit on mortgage loan- A Mortgage loan is offered on mortgage property like commercial mortgage, personal mortgage, real estate property.

Tax benefits are offered on mortgage loans. The borrower can get higher loan amounts for the purchase of property, in which the property itself is pledged as security. As a result one do not have to obtain additional insurance on the home. Hence benefits are obtained without incurring extra cost. The interest which is paid on Home Equity Loan is tax deductible. There are 3 conditions to claim the mortgage interest deduction. Firstly, the person taking loan is legally responsible for the mortgage. Secondly, the loan should be secured against the property. The house should be the primary property. Thirdly, the person is not allowed to rent his home.

Tax benefits can also be availed on the commercial properties.