When it comes to arranging a higher amount in no time, nothing can beat an online personal loan. Yes, the benefits of personal loans are many. You get to borrow a large amount, get instant approval, funds disbursal and repay over a flexible tenor.
But did you know about the tax benefit on personal loans?
Yes, you can go ahead and avail tax benefit on personal loans under some conditions.
This post discusses everything about tax benefits on personal loans! Read on!
Is the loan of the personal loan taxable?
On average, the personal loan amounts that you use are not taxable! Yes, that’s a fact! It is because the loan amount is not taken as part of your income while filing ITRs. But, the loan that you have taken or plan to take must be from recognized sources – like banks and non-banking finance companies (NBFCs). It is because if you don’t do that, then the amount taken may be considered as a part of your income and may be taxable.
Is there any tax benefit on personal loans?
When it comes to availing any tax benefit on personal loans, you should know that it does come with tax benefits. But that depends on what purpose you have used the loan amount.
The Income Tax Act does allow tax benefit on personal loans, but only when you utilize the loan amount for specific purposes. You can avail the tax benefit on personal loans when you use the money for the following purposes:
- For higher education.
- Renovation or purchase of your home.
- Business expansions.
Tax benefit on personal loans on your house
Section 24 of the Income Tax Act says that if you use the online personal loan amount for construction or buying of a property, then it can be taxable! In such a case, the interest amount on it may be exempted from your taxable income. If the personal loan amount is taken to renovate/buy the home, then you can enjoy tax deductions. It will be under Section 24 (b) of the IT Act.
An amount of up to Rs.2 lakh could be deducted in interests for a self-owned home. On the other hand, the entire interest rate on personal loan will be counted for a rented place.
But to do that, you ought to save all valid documents so that you can ask for tax benefits on personal loans.
Tax benefit on personal loans for assets’ purchasing and business purpose
If you use the loan amount for business purposes or assets purchased other than the property, then you can add interest paid to acquisition’s cost. In turn, it will lead to the reduction of capital gains and even the liability of the tax.
You are now aware of the ways you can make the most of the personal loan to avail tax benefits while using the loan amount for different aspects.
If you are looking to meet any urgent needs of funding for multiple purposes, then you can apply for an online personal loan.
All that you need to do is maintain a robust cibil score of 750+, repayment and income history to get the loan approval in a flash.