Here Are The Tax Benefits On Personal Loans That You Can Avail
Income tax benefits are only available on secured loans. You can claim exemptions of up to Rs.1.5 lakh under Section 80C on the principal and up to Rs.2 lakh on the interest paid for the loan.
Generally, unsecured loans like personal loans don’t provide any income tax exemptions. However, you can claim deductions with these loans depending on how you use them.
Following are the two ways how you can use a personal loan to avail income tax benefits –
- For the construction/purchase of a property
You can avail of deductions on your payable income tax if you use the loan to construct or purchase a property. In such cases, you can only claim exemptions on the loan interest paid up to Rs. 2 Lakh under Section 24(b).
2. For home renovation
Personal loans can also provide income tax benefits if you use the loan to renovate your house. In such cases, the deductions are also available on the interest paid under section 24(b). However, the maximum exemption that you can claim is limited to Rs.30,000.
3. For higher education
Income tax deductions are available if your personal loan for higher educational purposes. In such cases, the benefits are available on the loan interest paid. There is no upper limit to the benefits under Section 80E. However, you can claim the exemptions for up to 8 years.
Must Read: A Quick Insight Into Reducing And Flat Personal Loan Interest Rates
4. For business purposes
You can claim income tax deductions with your personal loan if you have invested in your business; for example, to purchase assets. In such situations, the benefits are available on the interest paid. There is no upper limit to the exemptions, and the entire amount will be deducted from your payable income tax.
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Must Read: Here Is the Tax Benefit on Personal Loans That You Can Avail
