A home top-up loan is an additional amount that you avail on an existing home loan. Some borrowers offer these loans when you move your housing loan to them via balance transfer facility.
Top-up loans can provide home loan income tax benefits if you have invested the same in the construction or purchase of your property.
Here’s how you can avail tax benefits on home top-up loans-
Under Section 80C, borrowers can avail tax benefit of up to Rs. 1.5 Lakh on the principal. It is only applicable when the property is not sold off within the first five years of purchase or construction.
Under Section 24(b), borrowers can also avail tax benefits of up to Rs. 2 Lakh on the interesting part of home top-up loans in a financial year. The benefit can be claimed only when the construction of the property in question is completed within five years; otherwise, the exempted amount gets slashed to Rs. 30,000.
Under Section 80EEA, first time home buyers can enjoy an additional exemption of up to Rs. 1.5 Lakh on the home loan interest payment.
You can claim income tax benefit on top-up home loans, provided you furnish essential documents and receipts. Such documents should prove that the home loan top-up has been availed for the above purpose.
Since there is no end-use restriction on a home top-up loan; borrowers can use it for several purposes, ranging for higher education, financing marriage ceremony, business expansion, etc.
