Is There Any Tax Benefit On Personal Loan?

 

The moment you take a loan, you wish you get some tax benefits so that you can save some bucks. Like an education loan, you are not completely eligible for a tax deduction in the personal loan, apart from some exceptions. Getting some tax benefits can help you out in some savings when you end up paying extra bucks. If you are going for a personal loan and have several questions, run through this guide to solve all your doubts and queries. A personal loan is taken for personal reasons like weddings, abroad tours, medical emergencies, and home renovation. You cannot get tax benefits, unless for some exceptions cases. Take a look at how you can get a tax deduction if you are going for a personal loan.

 

When the personal loan is taken for business purposes


A personal loan comes with a flexible end-user facility, and if you use it for the business you can get a tax deduction. You will not get any tax benefits on the principal loan amount. The tax deduction will be done on the rate of interest that you pay extra to your loan provider. Your tax deduction will be applicable only on the rate of interest you have taken your loan. This case is exceptional only if you have taken the personal loan for meeting your business needs. If you are going ahead to invest in the business, you can expect a tax deduction.

 

When the personal loan is taken to purchase an asset


Are you taking a loan to purchase an asset? If yes, you are eligible for tax deduction under a personal loan. Assets like machinery, equipment, jewelry, and shares. In such a case tax benefits will be allowed in the year when the asset was sold and not the year when it was purchased. Any tax benefits or deduction that you expect will be made only on the rate of interest component and not on the principal amount. For house renovation and purchase using an instant personal loan, you will have to show the interest certificate to avail of tax benefits. Your bank will offer you an interest certificate if you are taking a personal loan for your home renovation or purchase.

 

Wrapping up

So, next time when you hear about getting tax benefits in a personal loan, don’t be shocked. You can avail of tax benefits if you are using the money for the above-mentioned purpose. Use a personal loan calculator and borrow responsibly and save some bucks with tax deduction.

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