What are the cases that allow tax benefits on Personal Loan? - Loan Trivia


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Thursday 12 September 2019

What are the cases that allow tax benefits on Personal Loan?

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An immediate personal loan is a kind of loan that you can apply for, to meet any kind of personal needs.

Be it sending your children for higher education, debt consolidation, vacations, and wedding and more; a personal loan can cover all costs.

Compared to the nature of other loans available in the market, a personal loan is easy to gab. 
The eligibility and documentation for immediate personal loans are hassle-free. It is an unsecured loan that is given on the basis of your creditworthiness, income level and other factors. Hence, getting approval and money disbursement time is also fast.

However, other than helping you fulfill your multiple needs in life, immediate personal loans also come with one more benefit.

There can be some income tax deductions on loan repayment. Therefore, let’s go ahead and study the immediate personal loan’s benefits.
Must Read: Taxes and the Personal Loan: Is Personal Loan Amount Taxable?

Major income tax deductions on immediate personal loans 

The income tax deductions or the tax benefits are allowed only in some cases. Have a look:

1. If you invest the loan amount in a business 
If the immediate personal loan amount has been invested in a business, the interest paid on the same could be taken as an expense. As a result, it can bring the tax liability of the borrower and lessen the taxable business’ profits invested in. There is no cap on the amount that you can claim in this case.

2. Investment for buying or constructing a residential property 
You can also enjoy tax benefits from your personal loan if you have used the loan amount for the construction or purchase of a residential property. Therefore, you are eligible to enjoy income tax deductions for interest repayment. It is allowed under Section 24 of the Income Tax Act, 1961. The maximum deduction allowed is Rs.2 lakh for an occupied home by the personal loan subscriber. If you have rented the house, then there is no cap on the maximum amount that you can claim. It is mandatory for the immediate personal loan borrower to be the owner of the property to claim taxes.

3. Asset investments 
The final case where you can avail of the income tax deductions under the personal loan is when the loan money is used for the purpose of buying assets. These assets could be shares, non-residential property, jewelry, some stocks and more. You can’t claim tax deductions in the year when the interest is paid. It would be added to the acquisition cost. When you decide to sell the asset, you can claim tax benefits in that year.

Some of the relevant cases where you can grab the income tax deductions on immediate personal loans are discussed. Being aware of the same will now help you to opt for it if you wish to take out a personal loan in the future.

Bajaj Finserv offers some amazing pre-approved offers on personal loans, housing finance, loans for business and a lot more. Opting for the same will lead to the ease of going through the loan application and processing faster.

You can check out your special pre-approved loan offers by providing some personal inputs like name, age, and mobile number.
Must Read: Highly Rated Advantages of Personal Loan that You Must Know

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