Tax exemption on home loan taken against fixed deposit as securityTax exemption on home loan taken against fixed deposit as security is available under section 24 and section 80 C
Apnaloan.com Research Bureau
10 Aug 2007
Recently, I purchased a house property. I took a loan from the bank against the security of the fixed deposit kept with the bank by my wife. The rate applicable on such loans is lower than the regular home loan available from the same bank. Will I get tax benefits on the repayment of this loan even though, I have not taken a home loan and the house acquired has not been given as security for obtaining this loan?
Neither section 24 (which governs the deductibility of the interest portion of the loan repayment) nor section 80C (which governs the deduction available with respect to the principal portion of the loan repayment) requires that the loan must be taken against the security of the house that is acquired by using the loan. The end purpose of the loan is important. As long as the purpose of the loan can clearly be shown as being the acquisition or construction of the house property, the tax benefits are available. The fact that the alternative security provided is owned by a third party (in this case your wife) is immaterial.
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