How to avail tax benefits from Personal Loans in India

by Finway Capital Empowering People Financially

As per the Indian Income Tax Act, there are no specific tax deductions for personal loans as offered for other regular loans like education loan, home loan, etc. But still there lie a whole lot of tax benefits that can be availed by the borrowers going for personal loan options. Considering the fact that personal loan doesn’t come under the tax deductions scanner of the Indian Income Tax Act, the reason for taking up the loan will be taken into consideration to grant tax deductions. Remember, one can only avail tax benefits in case of the personal loan when the reason mentioned for its grant fall under the income tax deduction scanner.

Following are the three cases wherein tax deductions for Personal loan in Delhi and across the nation are allowed:


1.         Business Investment

When the personal loan amount gets invested and utilized in business, the borrower can show the interest paid under the expense vertical of Profit and Loss Account of the business. This brings down the tax liability of the borrower and also reduces the net taxable profits from the investments made in business. In such a case there is no cap on the amount that can be claimed.


2.         Purchase or construction of a residential property

As per the personal loan providers in Delhi and around the nation, people can also avail great tax benefits from personal loans if they are utilizing the loan amount for the purchase or construction of a residential property. It is under Section 24 of Income Tax Act, 1961 that the borrowers can avail tax benefits for repayment of interest in such a case. The maximum amount limit of the amount availed for tax deductions is Rs 2,00,000 for occupying a new house. But for the properties rented out to someone, there is no cap on the tax amount that can be claimed.  All-and-all it’s important for the borrower to be the owner of the property in question to avail tax benefits.


3.         Investing in assets

The third and the last case where one can avail tax redemptions under personal loan domain are in the case of investments made in assets. This includes the purchase of jewellery, non-residential property, shares, certain stocks and much more. While the deductions can’t be claimed in the same year in which the interest is being paid but can be later added on to the cost of acquisition. And, the borrower is available with the opportunity of claiming tax benefits in the year in which the assets are being sold out.

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About Finway Capital Innovator   Empowering People Financially

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Created on Jan 15th 2019 02:46. Viewed 247 times.


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