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Personal Loan Tax Benefits – Everything You Need to Know
Posted on Tuesday, February 28th, 2023 | By IndusInd Bank
Personal loans are a versatile and accessible option for financial assistance that don’t require you to put up any assets as collateral. While these loans have higher interest rates than secured ones, their ease of access and versatility make them a popular choice for many. The best part is, personal loans can offer a range of tax benefits!
By utilizing these tax benefits, you can save money while getting the financial support you need. Keep reading to discover how personal loans can benefit you beyond financial support.
Are Personal Loans Taxable?
Personal loans are not taxable because the loan amount is not considered part of your income when filing your taxes. This only applies if you obtain the loan from a bank or an authorized non-banking financial company.
However, taking a personal loan from an unknown source may be considered part of your income and taxed accordingly.
Tax Benefits on Personal Loans
According to the Indian Income Tax Act, personal loans do not qualify for tax benefits. Nevertheless, the interest paid on a personal loan may be deductible, depending on how the borrowed funds are utilized. Here are three scenarios under which a personal loan would be eligible for tax benefits:
1. Loan Used for Purchasing or Constructing a Residential Property
Claiming tax benefits on a personal loan requires using the loan funds for purchasing or constructing a residential property. The interest paid on a loan can be deducted in accordance with Section 24(b) of the Indian Income Tax Act. If you are using the property as your primary residence, you can claim deductions of up to Rs. 2 lakhs. If you have rented the property, all interest paid on the loan can be deducted from taxable income. You must own the property to be eligible for these tax benefits.
2. Loan Used for Business Expansion
If a personal loan is utilized for business purposes, the interest paid can be claimed as a business expense, reducing the gross revenue to lower the borrower’s tax liability. This reduction of taxable profits also benefits the business. There is no cap on the maximum amount claimed in this scenario.
3. Loan Used for Purchasing an Asset
If a personal loan is used to purchase assets such as real estate, jewellery, stocks, etc., the interest paid becomes part of the cost of acquiring the asset. The borrower cannot claim a deduction in the year the interest is paid, but it will be included in the acquisition cost. The borrower can only claim the tax benefit when the asset is sold.
Get a Personal Loan from IndusInd Bank
If you are thinking of getting a personal loan, IndusInd Bank has great personal loan offers.
The entire process is marked by simple paperwork, quick processing, and instant disbursal of funds. No need to worry about putting up collateral or security! With loan amounts ranging from Rs 30,000 to 5 lakhs, you can apply for as much as you need.
And the best part? The interest rates are super attractive starting from as low as 10.49%! And that’s not all; the repayment tenures are flexible, ranging from 1 to 4 years, so you can choose what best fits your budget best.
Apply for a hassle-free, instant personal loan from IndusInd Bank today and address your financial needs with ease. Apply Now!
Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.
