When it comes to personal finances, every opportunity to save money counts. One such opportunity often overlooked is the potential tax benefits associated with personal loans in India. Many individuals are unaware that personal loans can offer more than just a financial lifeline during emergencies or when you’re in need of extra funds.
In this comprehensive guide, we will discuss the specifications of tax benefits of the best personal loan in India, helping you make informed decisions about your borrowing and financial planning.
Personal loans have become a popular financial tool for meeting various expenses, such as medical emergencies, home renovations, travel, and even debt consolidation. In India, personal loans are typically unsecured, meaning you don’t need to provide collateral.
But did you know that the interest paid on these loans can be eligible for tax benefits under certain circumstances? Keep scrolling ahead to find out more.
Tax Benefits on Personal Loans
Personal loans are a wise choice for handling a variety of sizable expenses because they have no restrictions on the end-use. Tax exemptions and deductions are available for personal loans as well. You can deduct any portion of your personal loan from your taxes depending on how you intend to use the loan money.
In the following situations, you may be able to use a personal loan to claim tax advantages:
A personal loan taken for remodelling your house is eligible for a tax deduction of up to ₹1.5 lakhs per financial year under Section 80C of the Income Tax (IT) Act. Therefore, you can benefit from the tax savings on a personal loan if you are taking out the loan to renovate or improve your home.
Buying or Building Residential Property
According to Section 24 of the IT Act, you are eligible for tax deductions of up to ₹2 lakhs if you take out a personal loan to buy or renovate a residential property. However, this benefit can only be claimed by the property owner.
The interest component of a personal loan can be written off as a business expense if the loan proceeds are used to invest in a business. This may assist the business owner in lowering net taxable profits and, as a result, income tax obligations.
If the proceeds from a personal loan are used to buy assets like nonresidential real estate, jewellery, stocks, or shares, they may qualify for tax exemption. The cost of acquiring the asset may include the loan’s interest component. By doing this, the capital gains from selling the asset are reduced.
To avail of the tax benefits of the best personal loan in India,you must be aware of the documentation requirements. Take a look at these:
Proper documentation is essential to avail the tax benefits. Make sure to retain all relevant documents, such as loan statements, loan agreements, property purchase agreements, and construction expense receipts.
When filing your income tax return, you can claim the deduction under Section 24(b). You need to provide details of the interest paid on the personal loan, the purpose for which the loan was taken, and the property details, if applicable. It’s recommended to consult a tax professional or use reliable tax filing software to ensure accurate and hassle-free filing.
Taking personal loans from banks and other financial institutions is a traditional way to secure money for emergencies. Nowadays, people are opting for fast, secure, and readily available online personal loan apps. These instant personal loan apps are emerging as the trusted options for taking personal loans. It is a smart move to be financially prepared, whether you need money for an unexpected emergency or to cover a planned expense.
Among the many loan apps that claim to be the best, True Balance is one of the most reliable personal loan apps. Its user-friendly interface, quick loan processing, and commitment to data security make it a trustworthy option. It is the ideal choice for people who need immediate financial assistance because this loan app understands the need for accessibility and convenience among modern users. You can download the True Balance app from the Google Play Store to learn more about their services.
Personal loans are versatile financial tools that can provide much-needed financial relief in various situations. However, understanding their tax implications is equally important. By being aware of the tax benefits associated with personal loans, especially those related to property purchase or construction, you can effectively manage your finances and maximise your savings.
Remember, personal loans can be more than just a financial burden; they can also offer tax-saving opportunities. Always consult a financial advisor to understand the specific implications of your unique situation and make informed decisions.
