Top-up loans, availed over and above an existing home loan, also offer income tax benefits similar to the latter. These tax exemptions are restricted based on loan usage.
Underneath, different sections offering benefits like tax exemption on such a top-up loan
are discussed in detail –
Under this section, borrowers can claim a deduction in their income tax payment if they availed a top-up loan to renovate their home. This section allows a maximum of Rs.30,000 to be claimed as a deduction for the interest paid on their top-up loan.
It is important for borrowers to also keep in mind that the total amount eligible for exemption remains Rs.2 lakh including both home loan and the top-up loan.
Individuals availing a top-up loan to fund their higher educational pursuits can also avail tax benefits. This section allows exemption of the interest paid on a top-up loan. The major advantage of this section is that it has no upper limit. However, the exemptions will only be available for a period of 8 years.
Borrowers of home loans who have already availed benefits under Section 80C can also avail this exemption under Section 80E of Income-tax Act.
In addition to the above, borrowers will also be able to income tax benefits on the loan if it is invested in a business or used to purchase an asset other than property.
Any borrower who has availed top-up loans can avail all the income tax deductions
& benefits offered under these sections mentioned above.