Tax Benefits on Personal Loan: Instances When it is Allowed

Personal loan comes with end-usage flexibility and is usually approved faster than other loan applications. Thus, it is one of the most commonly availed credit scheme across the globe. One can use the credit scheme for managing their regular business needs — all of it, and then the funds are allowed to be used for financing marriage ceremonies along with other such personal expenses. However, when it comes to claiming tax benefits using personal loan; there are only a few instances when it is allowed.

1. Taking a personal loan for higher education: As per the current Income tax provisions, a person taking a loan for financing higher education can claim tax deductions under section 80E. The maximum deduction available under this provision is capped at Rs 1.5 lakh per annum and the same can be done for a maximum of 7 years to 8 years.
2. Taking a personal loan for home renovation: Home renovation is a definite and expensive need and there’s no denying that. Therefore, under normal circumstances, it’s difficult for people to pay the cost of renovating their home without taking a loan. Hence, a home renovation loan is offered to people needing it along with the tax benefits under section 24B.
3. Tax benefits on taking a personal loan for medical expenses: Last but not least, a personal loan used for paying medical expenses can be claimed as a deduction as per section 80D. Though the terms and conditions differ accordingly.

Originally published at personalloanfinancing.wordpress.com on February 26, 2019.