Here's how can you get tax benefits from personal loans
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personal loan, while collateral-free and easy to obtain, can be expensive as some lenders levy high loan interest rates. While applying with the right lender can bring down your net interest outgo, another way to save is to make use of tax benefits from a personal loan that brings down your total outgo.
The Income Tax Act does not spell out any particular tax deductions for personal loans and hence, you may not know about the various tax benefits you can avail. Ultimately, these boil down to the end-use of the loan.
Read on to know about the various tax exemptions and tax deductions you can avail on a personal loan.
Is a personal loan taxable?
Since a personal loan is not considered to be a part of your income, you do not have to pay any income tax on a personal loan. However, you can still claim a tax exemption or tax rebate on a personal loan. You can avail tax benefits from personal loan offerings if the end-use is business, purchase/construction of real estate or purchase of an asset. Read on to know more.
Personal loan for business If you use the personal loan for business purposes, then you can claim the interest paid on the loan as a tax-deductible expense. Since the interest is deducted from the business' profits, your net tax liability is reduced.
Personal loan for buying or constructing a residential property Section 24 of the IT Act allows you to claim tax deductions if you take a personal loan to purchase a residential property. This includes taking a personal loan to renovate a home; you can claim a tax deduction up to Rs 2 lakh for a self-occupied home. There is no limit if the house is deemed as let out or given on rent.
Personal loan for purchasing any other asset If you take a personal loan to buy an asset, you can claim tax deductions on the interest amount of the personal loan. However, you cannot claim this deduction in the same year. Instead, it is added to the cost of acquisition and on selling the asset, you can claim the tax benefit. Here, the increased cost of acquisition lowers capital gains.
What are the things to consider while availing tax benefits from a personal loan?
To claim tax benefits from a personal loan, you need to furnish the following documents as proof expense voucher, bank certificate, sanction letter, and auditor's report.
Apart from the three tax benefits that you can claim to make repayment simpler and more cost-effective, you can also use an EMI calculator. This tool can accurately calculate the EMI for a personal loan and you can use it to pick a tenor that keeps your outgo within your budget. Bajaj Finance Limited, the lending arm of Bajaj Finserv, offers personal loans up to Rs 25 lakh and a lengthy repayment tenor of up to 60 months.
With its Flexi Loan facility, you can withdraw from the total sanction in parts, as many times you require, without submitting multiple applications or paying additional charges. Moreover, you only have to pay interest on the amount you draw from the total sanction, thereby reducing your EMIs by up to 45 per cent. Once you check the personal loan eligibility criteria, you can check your pre-approved offer from Bajaj Finserv for expedited access to financing.
This story is provided by BusinessWire India. ANI will not be responsible in any way for the content of this article.
✔️ Here's how can you get tax benefits from personal loans
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