Looking for tax benefits on a personal loan? Then, always go with personal loan options to save yourself from tax. Personal loans provide several tax exemptions that provide individuals with the flexibility to meet any financial crisis, such as buying a new car, home renovations, travel expenses, wedding shopping, medical emergencies, etc. Why choose a personal loan? Personal loans are easily accessible to borrowers with lenient eligibility criteria and a few documents to get this loan in a few hours and solve all money crisis.
However, personal loans are unsecured loans that do not require any collateral, like a home loan or an education loan. For more information related to income tax exemption and how to utilize the personal loan tax implications, check out the below points and learn more with examples.
Tax Benefits on Personal Loan
Generally, personal loans do not offer any specific tax benefits, but in a particular situation, they only allow for tax deductions on personal loans, and it is completely based on their end use. To avail of these tax benefits on the personal loan, a person must be able to provide evidence of its use in tax benefits such as:
Home renovation: Home renovation loan are quite eligible for a tax deduction as per Section 24(b) of the Income Tax Act, and they are under the Indian constitution. This rule allows deductions of the loan up to Rs. 30,000 yearly on the interest paid of the overall loan amount.
Buying a home or construction: A personal loan is taken for the buying or construction of a home, and it is considered a specific tax benefit that is available. If you are the owner of the property, then you can claim an interest deduction of up to Rs. 2 lacs. The overall interest rate is exempted if the property is rented.
Education purposes: An education loan is beneficial to finance higher studies, especially in PGDM courses, for yourself, your spouses, or your children, and it allows you to claim tax deductions under Section 80 (E). This will be beneficial for all students for a maximum of eight years or until the loan’s complete repayment of the amount with interest rate.
Business capital: If you are planning to take a personal loan to invest in a business model, then you can easily claim for a personal loan tax benefit on the interest paid on the loan amount for a business venture expense is under Section 37 of the Income Tax Act. Several entrepreneurs avail of this business loan for tax exemption.
Final Note
The personal loan is not taxable; personal loan tax exemption is definitely possible, but only for limited scenarios. To know more about personal loan benefits, it’s advisable to consult a tax expert or for other purposes. By following the above points, you can easily understand the value of a personal loan. It is the right time to avail of a personal loan and utilize all the benefits of this loan.
