Know How Personal Loan Can Affect Your Tax Benefits

 

Personal loans are among the best solutions that you can go for if you wish to meet many of your needs.

Based on your credit score, repayment and income history, you can get the loan approval fast and at a lower rate. It is because the online personal loan is an unsecured facility, and you don’t need to submit any collateral for it.

Other than providing you with a higher loan amount with a flexible tenure, the benefits of personal loan are many.

But did you know that you can also avail tax benefit on personal loans?

Let’s know how you can make the most of the tax benefit on personal loan in this post!

Is personal loan taxable?

Personal loans are not taxable, generally. It is because the loan amount is not taken into consideration as your income’s portion while filing the income tax returns (ITRs). It denotes that you don’t need to bother about paying any income tax on personal loans. But there are ways you can always enjoy tax benefits on personal loans.

Tax benefit on personal loans depends on the usage  

You can always enjoy the tax benefit of the personal loan, and it depends on the way you use the amount. If you use the loan amount for specific purposes, then you have the freedom to pocket tax benefits on personal loans.

If you use the loan amount for purposes such as home renovation/purchase and business expansions and more, then you can avail tax benefits of personal loans. 

1)      Using the loan amount for your home

If you use the loan amount for buying or the construction of a home, then the interest paid can be claimed as the exemption from the taxable income. Thus, if you have availed the loan money to renovate/buy a home, then Section 24(B) lets you pocket tax benefits. For homes that are self-employed, you can deduct interests of up to Rs.2 lakh. But, you can claim the entire interest paid on personal loans for a rented home.

2)      Using the loan money for business purposes

If you want to use the loan amount for business purposes, then the interest paid can be added as the cost. In turn, it can lessen capital gains and also tax liability.

3)      Using the loan amount for the purchase of assets

If you are willing to use the personal loan amount for buying some assets (property not included), then the interest paid would be added to the acquisition cost. This can also assist you in lessening the tax liability and capital gains.

You are aware of the easy ways you can enjoy the tax benefit on personal loans. The only thing to do is using the loan money tactfully and availing tax advantages.

If you are all set to apply for an online personal loan, then you should check your credit report. If it’s 750 or more and if you have maintained a healthy repayment and income history, then you can get the loan approval at a lower rate.

You can also compare all available personal loan offers on a third-party website.

This way, you can easily get the best available deal meeting your needs and the repayment capacity the best.

Many lenders can provide instant loan approval with money disbursement within 24 hours if you are the right candidate.

Thus, if you need funds quickly, then the online personal loan is one of the best solutions to go for.