Tax Benefits On Home Improvement Loans
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The tax deduction is available not only for the purchase or construction of a house, but also for loans taken for the purpose of repairs and renovation of the house. Such loans are typically called “home improvement loans”. The interest paid on the home improvement loan is tax deductible up to Rs 30,000 per annum. Home improvement loans have been introduced by quite a few banks for repairs and renovation such as internal and external repairing, waterproofing and roofing, complete interior renovation, tiling and flooring, etc. Luxury items and fireplaces are generally not eligible.
Home Improvement Loans
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A home improvement loan is distinct from a loan taken to acquire or construct a house. These loans are given for implementing repair works, healing and renovations in a home that has already been purchased. To avail the home improvement loans, you have to first estimate the amount required for extending the house and then submit the plans to your bank. Home Improvement Loans are sanctioned only after the original property papers are in order. The loan will not be sanctioned without them. Therefore, if an individual has an existing housing loan from a particular housing finance company, then he will have to necessarily opt for a renovation loan from that housing finance company.
Tax deduction on Home Improvement Loans
Tax deduction is not only available for the Home loan taken for the purchase or construction of a house but also for Home Improvement Loans taken for the purpose of repairs and renovation of the house. However, Principal payment on such a loan is not eligible for deductions. Only owners of the home or co-owners are eligible for tax benefits.
Under Section 24, the interest paid on the home improvement loan is tax deductible up to Rs 30,000 per annum. If you are already servicing a home loan and availing of the tax benefit for the interest paid on the loan, then the combined overall limit for the tax deduction for interest paid on both the home loan and home improvement loan is Rs 150,000.
In case the interest paid on the home loan is Rs 120,000 or below, then you will be able to get the maximum benefit of Rs 30,000 on the home improvement loan provided you have paid so much interest during the year.
Home improvement loan application procedure
The home improvement loan is a specially designed loan system which caters to the need of the homeowner in improving, restoring or renovating their existing homes. A number of lenders have made their presence felt to add to the value of the home improvement loan system whilst making it one of the best loan options to bank upon to game with your home improvement necessities.
To avail the home improvement loans first you have to estimate the amount required for extending the house and then submit the plans to your bank. The bank provides 85-90% of the estimated amount whereas you need to provide the rest. Once the ‘technical department’ of the said housing finance company has approved the quotation only then the lender evaluates your repayment skills and the loan will be disbursed.
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