Want to renovate home? You can claim tax benefit on a top-up home loan

This benefit is, however, available only if the borrower uses the money for home repair and renovation

When an individual is looking to raise a large sum, a top-up home loan is the cheapest option available, with minimum paperwork require.d

Lenders don’t have a restriction on the end-use of the loan. It's as good as a personal loan at half the interest rate, and in some instances, it is eligible for a tax deduction.

The principle for availing tax benefit is the same as for a regular home loan.  If you are constructing a new house or purchasing a ready property with a top-up, you can get a tax deduction on the principal as well as the interest portion.

The same holds true if you are constructing an additional room.

If the borrower takes the loan for home renovation, only the interest paid gets the tax deduction, and it is capped at Rs 30,000 in a financial year.

If the top-up loan is availed for any other purpose, such as education of children, their marriage or for business purpose, no income tax deduction is available.

A business owner can, however, claim the interest portion as an expense, which will go towards reducing the taxable profit.