3 things to know before availing of tax benefits on Personal Loan

 

Remember that the personal loan amount you raise is not part of your income. This means you won't pay any income tax on the loan amount. That said, remember that this only applies when you take a bank or recognized NBFCs. Tax benefits for companies/ individuals in India include exemptions from corporate income tax, dividend distribution tax, personal loan tax, and excise duty on industrial alcohol. There are various loans that are part of tax benefits on personal loans. The following are the loans where you can avail of the tax benefits. You can get a quick loan online as well. 

Loans for business purposes

Term loans for businesses are tax-exempt up to a certain extent. There are, however, other types that carry tax benefits on personal loans. Personal loans for your business or an unsecured line of credit typically don't involve any taxes.

Loan for any other asset

Besides residential property, there are many instruments you can invest your money in: equities, gold & silver, even crypto. It is important for people to diversify their assets. If you need funds for any of these purchases, you can apply for the appropriate product to enjoy the tax benefits listed on that item. 

Purchase of a home or home renovation 

The home loan you may have taken to purchase a home is not considered when figuring your personal annual taxable income. You can use it toward its full value when selling your house or when building a new one. You can deduct up to Rs. 2 lakh if it's a house you own and live in. Further, the total interest paid on your quick loans can be deducted from your taxable income. Make sure that you keep all the relevant documents before claiming the tax benefit.

Conclusion

Personal loans are offered by banks and other lending institutions. They are usually short-term loans that can be used to meet short-term needs, such as covering household emergencies or unforeseen medical bills. There are various types of personal loans available today which can be tailored towards individual needs. They can be secured against property or other assets like cars. 

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