All you need to know about ICICI Plot Loan and its tax benefits

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Most of us want to be homeowners. Finding the ideal apartment or flat to live in with our loved ones is something we all strive to do. Then there are those who don’t find living in a small, ordinary flat to be enjoyable or exciting. They picture themselves constructing a bungalow or villa with lots of bathrooms, a terrace, and perhaps even a big kitchen.

For such people, buying a piece of land and building a home from scratch is preferable to renting a flat. These people can also obtain a mortgage in order to purchase a plot of land and construct a home there.

Let’s first define a PNB Plot Loan before we talk about the tax benefits of such a loan.

What is a home loan based on a plot? An ICICI Plot Loan  is a kind of mortgage that allows you to purchase a piece of land or a plot of land and then build a home on it to suit your needs. You might be able to hire a contractor or even put off starting the construction of your home for a while, depending on the loan terms and deadlines specified by your lender.

You can get ICICI Plot Loan if you want to build farm houses, bungalows, or villas. A plot loan is a loan that the borrower has pledged as collateral and that must be repaid in equal monthly installments with interest added to the principal loan amount. The lender has the legal right to recoup their investment by selling or placing a bid on the collateral if the loan is not repaid within the allotted time. Considering the rising cost of real estate, investing in land is a smart move because it will appreciate in value. It also comes with a number of tax benefits. The 

Workings of ICICI Plot Loan Tax Benefits Can we benefit tax-wise from a loan for a plot? is a typical question that most plot buyers ask. The answer to this question will depend on what you want to do with the plot. If you intend to keep the plot in its current condition as a long-term investment and hope to sell it in the future when its value increases, you will be disappointed to learn that there is no tax relief. However, you will benefit tax-wise if you get a plot loan and construct a house, a bungalow, a villa, etc. on that plot.

The two loan components, purchasing the plot and constructing the home on it, can then each enjoy tax benefits. Let’s investigate it using an example. Mr. Roy makes the decision to purchase some land and gets a Rs. 500,000 PNB Plot Loan from a housing finance company to do so. After a few months, he gets in touch with his housing finance company once more and asks for a loan for Rs 300,000. His decision to construct a bungalow there follows. Mr. Roy can combine the sum of the two loans, or Rs. 800,000, to be exempt from taxes. utilising tax advantages to obtain a plot loan Now let’s talk about when and how to utilise the tax advantages of plot loans. As was already stated, tax benefits are only accessible if a house is constructed on the property. Additionally, tax deductions are only permitted in the year that construction is completed. You are qualified for the following tax benefits following the completion of construction. Tax benefits under Section 80C:

You may deduct up to Rs150,000 annually from the principal repayment portion of your ICICI Plot Loan under Section 80C of the Income Tax Act. The amount actually borrowed from the lender, minus any interest payments, is referred to as the “principal amount.” The maximum cap of Rs150,000 also covers the registration and plot title transfer fees when paid in the year that construction is completed.

After the building is complete and you’ve moved into your newly constructed home, you might be eligible for tax breaks on the loan’s interest portion. PNB Plot Loan tax benefit under Section 24. You can only write off Rs 200,000 of the interest component of a plot loan if you convert it into a regular home loan that allows it. You can change the land loan into a home loan once the building is finished by providing your lender with the certificates of completion and occupancy.

Additional benefits Let’s look at some additional benefits of this loan now that you are aware of all the tax advantages connected with a loan for the purchase of a plot. Interest deduction percentage: The national taxation code states that if you purchase a plot to build a home, plot loans are available with lower interest rates. This could be very advantageous because paying interest makes up a sizable portion of repaying your loan in the initial years after buying the plot. The interest rates on pre-construction loans are lower: In addition to being qualified for discounted interest rates when construction commences at the beginning of a fiscal year, you are entitled to pre-construction interest from the same year payable in five equal installments. The deduction is only available to those who pay a total of Rs200,000 and reside on the property.

Let us know more about PNB Plot Loan:

The characteristics and intended use of the property-The subject property or portion of land must be residential, non-agricultural, and non-commercial, as well as situated inside the boundaries of the municipality or corporation, not in an industrial region, and not in a village for these types of permits to be issued for SBI Plot Loan.

Interest rate and tenure- The maximum loan term for buying a home is typically 30 years, whereas the loan term for buying a piece of land is frequently between 15 and 20 years. The exceptions are the few NBFCs that do provide up to 20-year loans on land. Due to the perception that they involve less risk, mortgage loans have a slightly lower interest rate than land loans.

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