INTEREST ON "Housing Loan VS Loan Against Property" + Tax Planning/Benefits.

Loan Against Property(LAP) 
1. LAP is a loan which is given against the property.

2. Its is a secured loan where your property whether residential or commercial property is                        MORTGAGED and you get loan against it.
3. Here person already owns a property and he is taking loan against it.

4. Usage of loan can be for any other purpose as the borrower wishes.

5. Lending limit is usually 50% to 60% of the market value of the property.
          Hence there is no upper limit of LAP, usually personal loans wont go beyond 10 to 15 Lacs.

6. Interest on LAP: As the loan is already secured, hence the interest rates on LAP is usually on          the lower side as compared to the personal loan.

7. TAX BENEFITS: As the borrower has mortgage his property hence NO TAX  BENEFITS          under section 80C and Section 24 of Income Tax Act, 1961. So it is recommend to prepare              Financial Statements(Balance Sheet and Profit & Loss Account)  and claim such interest paid on        LAP as Interest Expense if end use of loan is for business purpose.

THINGS ARE QUITE DIFFERENT IN HOME LOANS

1. Home loans are usually taken to purchase the house or to construct the house.

2. TAX BENEFITS:

INTEREST DEDCUTION UNDER SECTION 24 OF INCOME TAX ACT, 1961:

• Interest Deduction is allowed only from the year in which Construction is completed. 

• Interest Paid before Completion of Construction is allowed in EQUALLY in next 5 YEARS only if construction is completed with 5 years from the end of yea
• r in which loan is taken.

          Exp: if loan is taken on 25-06-2016

                   Financial Year is 2016-17

                   3 years from the end of year in which loan is taken is : 31-03 2017+5 years = 31-03-2022

                   Means construction must be completed before 31-03-2022.

• Maximum amount of deduction is Rs. 2,00,000 for SELF OCCUPIED PROPERTY

• For Other than Self Occupied Property- No Limit of Interest deduction So Practically this point is beneficial for TAX PLANNING as  there are many people in India who construct House Property just to give it on rent for Income purpose, hence such property is not for self occupied. Hence One can itself guess How tax planning is possible. Isn't good?? 

• This Interest Deduction is available only to the person who acquired/Construct the property with loan money NOT TO THE SUCCESSOR OF THE PERSON. 

INTEREST DEDUCTION UNDER SECTION 80EE OF INCOME TAX ACT, 1961: This point of already discussed in earlier blogs. kindly refer the link below:

        https://consultaxindia.blogspot.in/2018/01/special-housing-loan-interest-deduction.html