Aug 24, 2023

Plot Loan Tax Benefits: Income Tax Exemptions & Rebates

by Godrej Properties Limited



A plot loan is popular when purchasing a plot of land for your dream home. But what about a plot loan income tax benefit? Or can you claim any tax benefit on the plot purchase? In this article, we'll explore the plot loan tax benefits and how you can make the most of them to save on taxes.

Plot Loan Income Tax Benefit: Eligibility

Unfortunately, you won't be eligible for tax benefits if you plan to buy a plot and keep it as an investment without any construction. However, if you intend to construct a home on the purchased plot, you can avail yourself of tax rebates on plot loans and home construction loans.

Tax Benefit on Plot Purchase Loan: How to Avail

There are two ways to gain tax benefits on a plot purchase loan: 

Under Section 80C

You may deduct the principal repayment component of both your plot and home loans under Section 80C of the Income Tax Act. This deduction can be up to INR 1,50,000 per year from your taxable income. Additionally, title transfer and registration fees are part of the exempted limit if paid in the year of home construction completion.

Under Section 24

You can avail of land loan income tax benefits under Section 24. To avail of this benefit, you must convert your plot loan into a regular home loan by submitting a completion certificate and occupation certificate to your bank or lender. The maximum deduction under this section is INR 2,00,000 if you and your family reside in the newly constructed home. However, if the property goes on rent, the interest is relinquished.

Additional Plot Loan Tax Exemption

Apart from the mentioned loan on plot tax benefits, you can also apply for the following:

Deduction on Interest Rates

Opting for a plot loan to construct a house on it can grant you access to lower interest rates, reducing total repayment.

Pre-construction Interest Reduction

You may claim a pre-construction interest reduction for the financial year before construction. However, this deduction is capped at INR 2,00,000 and is applicable only if the owner or their family resides in the newly constructed home.

Conclusion: Plot Loan Tax Benefits You Shouldn't Miss

There is a significant plot plus construction loan tax benefit under the Income Tax Act. While plot loans may not provide immediate tax benefits, constructing a house on the plot opens the door to various deductions. Planning plot loans wisely and using this income tax rebate on plot loans to maximise savings while building your dream home is essential.

Frequently Asked Questions

Q: Is it good to take a plot loan?

A: While plot loans may not offer direct tax benefits, they can still be advantageous as the value of land tends to appreciate over time, providing an opportunity for future profit.

Q: Can we take a home loan for a plot?

A: No, if you intend to purchase a plot, you need a plot loan instead of a home loan.

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