Tax Benefits on Personal Loans
Personal Loans are unsecured loans, which is ideal for situations when you need funds but don't have an asset to pledge as security. Generally, the personal loan is not taxable, as loans are not considered a part of your income when you are filing your IT returns. However, the personal loan must be from a valid source like a bank or other financial institution as loans from unknown sources may be considered as income while computing your taxes.
Hence, you can claim the income tax benefits on personal loans. However, there are some conditions attached to it.
People applying for a personal loan might wonder—is there any tax benefit on such loans? Well, the answer, in short, is—yes! Not many people know that they can get tax benefits on personal loans and miss out on the rebates.
Conditions under which you can claim income tax benefit
Whether you get tax benefits or not will depend on the end use of the loan amount. If you have used your personal loan amount to acquire, construct, repair, or reconstruct a house or property, you can claim tax benefits. If you can prove that you have used the loan for a valid expense, you can actually claim tax deductions on the interest paid on the loan. You will be required to keep documents like bills and labor charges which will help prove that the loan amount has been used towards home buying or home repairing purpose, as they will be needed at the time of making claims.
Income tax and personal loans
As per the current Income Tax laws, the government allows tax deductions on any kind of loans taken to buy or repair residential properties. So, if you have used your personal loan to that effect, it can be considered as expenses for claiming the deduction. You can also use the loan amount towards down payment for your chosen property and claim tax exemption on it.
But not all of your loan repayments will be considered for tax rebates. Generally, you can get deduction only on the interest paid for the loan amount and not for the principal amount of the loan.
Apply for a personal loan in India
Need a personal loan for your expenses? You have come to the right place! You can check your eligibility and apply for a personal loan by signing up with CreditMantri. It is quick, simple and above all, free.
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