Can You Get Tax Benefits on Personal Loan?
One of the commonest loans that Indian borrowers are nowadays availing is none other than the personal loans. Availing a personal loan helps a borrower cover many expenses. It could be medical emergencies, wedding, and vacations and beyond.
Based on your personal loan eligibility and other factors related to the CIBIL Score and repayment capacity, you can get up to Rs.25 lakh.
The interest rates on personal loan are competitive. But you can stretch its repayment over a long tenor to pay lower EMIs and manage your monthly expenses easily.
Other than using the personal loan funds for any purposes, you can also lap up some income tax deductions while availing the facility.
In the same context, here is some income tax deductions on personal loans discussed in this quick post.
Income tax deductions benefits of personal loans at a glance
- When you use the amount for business purposes
If you plan to use the personal loan money in your business, the interest paid on it stands eligible to be claimed as a tax deductible cost.
The paid interest could be deducted from the profit before computing your tax liability. Hence, it can lessen the net taxable profit of the business and cut the liability.
However, there is no prescribed limit for the interest figure that one can claim as the tax deductible cost.
- When you use the loan amount for buying/building property
If you use some proceeds of the personal loan for buying or constructing your self-occupied property, you can claim income tax deductions as per the Section 24.
The interest accrued on the loan figure is permitted as a deduction from net income of the property. The maximum amount that you can claim is Rs.2 lakh.
To do so, you need to submit a certificate availed from your bank. It should certify that the loan amount was used for building, buying or property’s renovation.
- When you use the amount for any other asset
Have you used the personal loan amount for buying assets like jewelry, shares, bonds, or the non-residential property?
Then, the interest amount paid during the year on it is not permitted expense. Nonetheless, the same should be added to the asset’s acquisition.
If it reduces the capital gains at its sales time, it may reduce the capital gains tax liability on the transaction sale.
When you avail a personal loan, the same is not taxable due to the reason that the received loan amount is not taken as the income.
To be eligible for income tax deductions on the paid interest on the personal loan, you need to submit relevant proofs to income tax authorities.
Yes, it should support your claim in the form of the certificate from your lender or auditor.
Hence, if you need to use the instant personal loan amount as the income tax deductible, ensure that you have all the required proofs to support it.
NBFCs has amazing pre-approved offers on personal loans, home loans, business loans, and others. It helps you in easing off the loan application process and makes it fast.
You can submit your basic details such as name and mobile number to uncover your pre-approved loan offers today!
Share this:
Category: Family Finances
