How To Get Income Tax Reimbursement on Personal Loans

Income tax reimbursement on a Personal Loan? Under certain circumstances, you can actually get tax benefits on Personal Loans. Read on to find out how.

Are you searching a good Personal Loan? Many banks and other financial institutions offer Personal Loans. Find out how you can apply for one, and how to gain tax benefits.

Getting Personal Loans For Salaried and Self-Employed

It is very easy for the salaried to get a Personal Loan . The self-employed can get this loan too, if they have a good amount of savings, and good credit score.

Eligibility for Loan

You should be an Indian citizen, between 21 to 60 years of age. The minimum age limit might be higher with many banks, mostly 23. You should have a steady monthly income of a minimum amount (varies according to lender). You should have been in the current job for at least one year.

Documents Required

For a Personal Loan, there is only minimal amount of documents required. This includes the Know Your Customer (KYC) documents you submit to banks.

ID Proof (Any one of the following)

  • PAN Card
  • Passport
  • Voter ID
  • Driving License

Residence Proof (Any one of the following)

  • Passport
  • Utility Bill
  • Ration Card

If you own the house

  • Property documents
  • Maintenance bill

You also need to submit a passport size photograph along with the filled in Application Form. If you have taken any other loans, do submit relevant documents.

For previous loans

  • Loan sanction letter
  • Repayment schedule
  • Record of EMI payments
  • Proof of successful loan closure (if any)

Income Proof Documents are Different For Salaried And Self-Employed:

                                         For Salaried Employees

Income proof

  • Last three months salary slip
  • Form 16
  • Bank statement for the last 6 months (from the account where your salary is credited)

Job continuity proof

  • Employment Certificate
  • Appointment letter for current job

Investment proof (if any)

  • FD certificate
  • Share Certificates
  • Mutual fund investment proofs
  • Proof of other investments if any

                                     For Self Employed Individuals

Income proof

  • Last 2 years IT returns
  • Balance sheet for last 2 years
  • Profit & Loss Statement for last 2 years
  • Last one year bank statement of business current account and savings account

Investment proof (if any)

  • FD certificate
  • Share Certificates
  • Mutual fund investment proofs
  • Proof of other investments if any

If you’re self-employed, you’ll also need to provide office address proof and business existence proof:

Office address proof

  • Utility bill
  • Maintenance bill

Office ownership proof

  • Property documents
  • Electricity bill
  • Maintenance bill

Business existence proof

  • Saral copy for the last 3 years
  • Company Registration License
  • Registration certificate under Shop & Establishment Act

How To Apply

Do a thorough comparison of various Personal Loan offers. Use Personal Loan EMI Calculators and Eligibility calculators. These help you calculate the highest loan amount you can afford, and find the best loan offers.

You can visit the bank or NBFC office and collect the application form. Fill it in, and submit all the various documents personally.

You can also go to the relevant lender website, find the Personal Loan page, and apply online. Send the required documents through email or upload them. Alternatively, have a bank representative collect them from your home.

The lender will verify the information and documents provided. They will also check your credit score. If it is too low, your loan application may not be approved. If you have a good credit score, the loan will be approved. The amount will be quickly transferred to your savings account.

Tax Benefits On A Personal Loan

You can even qualify for Income Tax Reimbursement on Personal Loan. If you have invested the loan amount in your business, it can be claimed as business expense. This reduces your tax liability.

Let’s say you’ve used the loan for house renovation, purchase, repair or reconstruction. You can claim tax exemption on the interest component of the EMI under Section 24(b) of the Income Tax Act.

This section does not look at the type of loan, only at the end use. So, if you have used the loan for home purchase, you can claim up to Rs.2,00,000 on a self-occupied home.

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