
6 Advantages of Using Loan Apps for Personal Financing
Nowadays, acquiring a loan is an easy task due to the access to instant funds online. Personal loans are one of the most sought-after options to provi...
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Personal loans are the most versatile financial instruments as they can be used to fund any of your financial needs. Be it a medical emergency or a vacation, personal loans are the ultimate financial aid.
Besides the ease of approval and quick disbursal of funds, there are also some potential tax benefits on personal loans.
So if you are wondering whether there are any personal loan tax exemptions, then here you will find out the various terms and conditions where you can get a tax rebate on a personal loan.
Here is all you need to know about a personal loan and see if you are eligible for income tax benefits on a personal loan.
Personal loans are the type of unsecured loans that provide instant access to funds. Although personal loans are not taxable as they are not part of your income, you can get eligible for some income tax exemptions on personal loans.
The type of your personal loan or the purpose for which you take it determines whether you get an income tax rebate on a personal loan or not. Personal loans are not mentioned under the Income Tax Act of India, but there are tax implications of personal loans and you are eligible for deduction from your taxable income, given the purpose of the loan matches the requirements for personal loan tax exemption.
Indian Income Tax Act has well-defined rules for tax exemption for loans and the interest paid on them. However, personal loans are not eligible for tax deductions. It’s how to use the money from the personal loans that decide whether you get eligible for a tax deduction or tax saving on a personal loan. So you can get tax exemptions for the money used from personal loans in an indirect manner.
Also, the source that you take the personal loan from, whether it’s a bank or NBFC, has some role to play when it comes to the taxability of your personal loan. So it is crucial that you only go for verified and legitimate sources when taking a personal loan. However, taking a personal loan from a bank or lending institution is considered a liability, and thus, does not get eligible for tax benefits on personal loans.
There are certain conditions under which you can claim some income tax rebates on personal loans. You may not get a personal loan tax exemption on the principal loan amount since it is a liability, but you may get deductions on the interest paid on the loan. Read on to find out such conditions where you can get tax rebates on personal loans.
Although most business owners go for business loans when they need funds for their business, getting a personal loan may be a better option. In the case of a personal loan, getting the approval is easy and you also enjoy a quick disbursal of funds. Even though business loans can also be easily acquired, a personal loan process is easier to get through. If you use the funds from a personal loan to provide for the business expenses, then the interest on it can be considered a business expense and you may get income tax benefits on a personal loan. This interest can be deducted from the net profits on your tax returns, which further lowers the amount of your taxable income.
Another way to get a tax rebate with the support of a personal loan is to use the money for investment. Although, there is no reason to get a personal loan just because you can invest it in the end. But if you want to have some tax savings on a personal loan, then investing the funds of your personal loan could be a beneficial deal. You may get a personal loan, and use the money to invest in shares, bonds, real estate, securities, etc. This way the interest incurred on the personal loan can be treated as the interest on your investments, and thus, may become eligible for a tax exemption and can help reduce the amount of the tax you pay.
A personal loan can also be used for financing your higher education as there are some tax implications of personal loans. Instead of taking an education loan, you can take a personal loan and use the funds as financial aid for your education. Know that the principal amount on a personal loan is not eligible for the deduction, however, the interest on it can be treated as an expense and get accepted as a tax exemption. Also, there is no limit to the amount of interest that can be considered for tax benefits on your tax returns. So it is a good option to get a personal loan to finance your education if you want to claim some tax benefits on your loan. You can also get such tax benefits on personal loans even if you have taken a loan to help finance the education of your child. Section 80 E of the Income Tax Act allows for a tax deduction of lakhs of rupees if the money is used to pay off educational expenses.
You can get a personal loan and use the funds for refurbishing your home if you want to get income tax exemptions on a personal loan. You can get your home renovated, update the interior, make another floor, install thermal insulation doors, etc. The interest paid on your personal can be regarded as expenses for home renovation, and thus, get eligible for deductions on your tax returns. Section 24 (b) of the Income Tax Act also allows for some tax benefits in certain conditions for purchasing the residential property. The interest paid on the loan that is treated as expenses for home improvements has an upper limit of ₹1.5 lakhs, however, there is no restriction on the deductible interest that can be claimed for exemption if it’s a rented house.
The tax benefits on personal loans in all the above-mentioned scenarios are subjected to certain conditions. So it is crucial to get suggestions from a tax advisor to know the tax implications of personal loans you are eligible for a claim for. You can also take the assistance of a legitimate lending institution that can advise you on such matters and guide you regarding the loans that you should be taking to get tax rebates.
If you want to get the best loan deals, then connect with Rupeezo. We are a credible loan aggregator platform having links with legitimate financing institutions. We help our clients get the best loan offers through our Personal Loan App with ease and help them get the various benefits associated with a personal loan.
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