Home loans are the most convenient funding options when it comes to purchasing a property. However, even after purchasing a house, you can incur several additional costs that can lead you to exceed your previously estimated budget. To prevent that from happening, you can avail a top-up loan to cover the cost of home renovation.
There are several benefits of availing this top up on your previously availed advance. One of the most important among them is home loan tax exemption
that is extended to the top up as well.
Tax Benefits on Home Loan Top-Up
The interest amount you pay against the top up loan is exempt from income tax under Section 24(b) of the Income Tax Act, 1961. Under the section, the interest you pay on your top-up loan is exempt from income tax up to Rs. 30,000.
However, this deduction is available in case the property is self-occupied. There is no ceiling in exemption if the house is let-out.
Section 24(b) is also applicable on home loans used to purchase or construct a house. In such cases, the maximum limit is Rs. 2 Lakh on the interest paid.
To claim the top up home loan tax exemption, you have to provide evidence that you have utilised the top-up loan to renovate, construct, repair, expand or acquire a residential property.
However, a top-up home loan
does not have any end-use restriction. You can use it to fund your home-related expenses, as well other costs like your child’s education, travel, purchasing other assets, etc.