ITC on Insurance policy & processing fees of loan against Property

My company owner took a Loan against property on his residential property which was ealier mortgaged to a NBFC (Hinduja Leyland). In January 2025 he decided to mortgage the same property to Bank in need of working capital required for the business. 

The bank has done insurance worth of Rs. 10 lakhs (Including GST) & Processing Fees of Rs. 7.50 lakhs (Including GST). 

Can i take the ITC on both Insruance premium & Processing fees ?

Please note that the bank provided the amount for the working capital after settling the existing loan running on the property.

Replies (1)

To determine if you can claim Input Tax Credit (ITC) on insurance premiums and processing fees for a loan against property, let's break it down: Insurance Premium -

 *General Rule*: ITC is not allowed for general insurance services related to motor vehicles, vessels, or aircraft, with specific exceptions. -

*Loan Against Property*: There's no direct restriction on ITC for insurance premiums related to loans against property used for business purposes. 

However, it's crucial to ensure the insurance is directly related to your business operations. Processing Fees - 

*GST on Processing Fees*: Processing fees charged by banks for loan services are subject to GST. - 

*ITC Eligibility*: ITC can be claimed on processing fees if the loan is used for business purposes. Since the loan against property is for working capital, which is a business purpose, ITC on processing fees should be eligible. Key Considerations -

 *Business Purpose*: Ensure that the loan against property and the associated costs (insurance and processing fees) are directly related to your business operations. -

*Documentation*: Maintain proper documentation, including invoices and payment receipts, to support your ITC claim. 

Claiming ITC - *Insurance Premium*: You may claim ITC on insurance premiums if they are directly related to your business.

 However, verify that the insurance service is not specifically restricted under GST laws. -

*Processing Fees*: You can claim ITC on processing fees as the loan is used for business purposes. It's recommended to consult a tax professional or CA to ensure you meet the necessary conditions and follow the proper procedures for claiming ITC on insurance premiums and processing fees.

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