Personal loans are extremely useful when you are in urgent need of funds. They can provide quick financial assistance and help you in tough times. But did you know that you can avail several tax benefits on personal loans? Whether you have taken a loan for home renovation, business needs, or higher education, you can enjoy numerous personal loan tax benefits. In this blog, let’s understand these aspects of income tax deduction on personal loans so that you can reap more benefits.
Is Personal Loan Taxable?
While availing a personal loan, one common question that arises is- does personal loan have tax exemption? Well, the principal amount which you get as a loan from the bank or the financial institution is not considered income. It is a liability and hence, it does not attract any income tax.
The interest you pay on personal loans is not automatically eligible for tax deductions. However, you can avail personal loan tax benefits on the interest amount if you use the personal loan amount for specific expenses. To avail these benefits, you will need to provide proofs such as receipts, invoices, and bank statements.
Personal Loan Tax Benefits
Here are the tax benefits on personal loans used for specific expenses:
Home Improvement or Purchase (Section 24(b))
If you use a personal loan for home improvement or buying a house, then the interest you pay on the loan can be claimed as a deduction under Section 24(b) of the Income Tax Act. Here, the maximum deduction allowed is up to ₹2 lakh per year, provided it is your own house.
Also Read: Tax Benefits of Home Renovation Loan
Business Expenses (Section 37(1))
A tax benefit on personal loan can be availed if you use the loan for business purposes. Here, the interest paid can be claimed as a business expense under Section 37(1). This would help you reduce the taxable income of the business.
Education Expenses (Section 80E)
Although this section of the Income Tax Act is linked to education loans, if you use a personal loan to fund higher education expenses, you may be eligible for a deduction. However, for that, you would need to justify the loan expense as part of the overall education costs.
Conclusion
Now that you know how you can enjoy tax benefits on personal loans, use the loan amount strategically. This would not only improve your finances but help you save taxes.
Regardless, if you are looking for a personal loan, look no further. Download the CASHe mobile app and sign up to avail an instant personal loan of up to ₹4 lakhs. With CASHe, you can get your loan approved quickly and get funds directly into your bank account. All you need to have is a valid ID and address proof, and a stable income.
