How to get tax benefits on a personal loan?Generally, personal loans are not taxable, since the loan amount is not considered as a part of your income when you’re filing income tax returns.This means you don’t’ need to pay any income tax on personal loans.
Section 24(b) of the income tax Act, 1961, allows for a tax rebate on personal loans if the amount is used for certain purposes like the home renovation or improvement. In this case, the interest rate paid on personal loan repayment up to Rs.30,000 can be claimed as a deduction from the total taxable income.
Personal loans are unsecured loans that can be availed without any collateral. It is the most popular loan type used for various personal purposes like wedding expenses, home renovation, and education or for paying medical bills.
Since there is no particular mention for a personal loan in the Indian Income Tax Act, the purpose for which a personal loan was availed will be taken into consideration in order to grant tax deductions for a personal loan.
Although personal loans are not taxable, you can enjoy the benefit of tax deduction in a personal loan, if you put the loan amount to specific end-use.
Listed below are the three cases to get tax benefits on a personal loan:
- Loan for home improvement or renovation - Tax rebate on a personal loan is possible if the loan amount has been utilized to meet expenses related to home improvement or renovation while reducing your tax liability effectively. The sanctioned loan amount should either be used to buy or improve a residential property and then you are eligible for tax deductions for the interest paid within the financial year.
- Loan for business growth - Also you are eligible for tax exemption if the instant personal loan amount has been used for expanding a business without any difficulty. You can claim the interest paid by investing in your business. This is especially important if you are a self-employed individual of a small business. There is no maximum deduction for such a claim and it merely depends on the interest payment for that financial year.
- Loan for other assets - Other income-producing assets are many like investing in shares, gold jewelry, cars or two-wheelers. If you are taking a personal loan to purchase any of these products, you are liable for tax benefits against the same. Interest paid on the same is considered the cost of asset achievement.
The above investment made from a personal loan reduces the total investment gains and provides personal loan tax benefits.
In this respect, SimplyCash instant personal loan powered by HeroFinCorp fits the norms and offers a tailored borrowing experience that is quick and easy with minimal and paperless documentation.
SimplyCash instant personal loan app arranges for disbursal within 24 hours after the approval and verification gets over. Eligibility criteria and documentation for personal loan tax benefits are simple and hassle-free.
Personal loan Eligibility and Documentation process
- Should be a resident of India
- Should be in an age group of 21-58 years
- Should earn a minimum income of Rs.15,000 monthly
- Six months bank statement/salary slip mandatory for salaried and self-employed
The personal loan documentation process for tax benefits
The basic documentation includes your Aadhar card, PAN card, address proof, and personal details. The online personal loan documentation process is paperless and does a quick verification for an instant disbursal of funds directly into your account.
Hence, though tax benefits on personal loans are rare, you can enjoy with specific investments only.