An instant personal loan is one of the key financial tools that can provide you with funds without delays. You are free to utilize the funds availed of an instant personal loan for many of your purposes without usage limitations.
Personal loans are also unsecured loan type, which means that you don’t need to provide any collateral or security to the lender to get it. The loan could be availed as per your creditworthiness, which is determined by your CIBIL score and repayment record. As a result, the personal loan interest rates are a bit on the higher side as lenders do that to cover their risks of possible defaults.
Nonetheless, scores of people in India and beyond apply for personal loan as it covers their immediate financial needs compared to other types of loans. If you have the required personal loan eligibility, you can get up to Rs.25 lakh from known creditors.
But, after having said that, is a personal loan taxable? Can you avail some tax benefit on personal loans or not?
If you are looking for answers to such questions, then this post will let you know more. Read on!
Generally, personal loans are not at all taxable. It is because the loan amount is not considered as a part of one’s income while filing the Income Tax Returns (ITRs). It simply means that you are not required to pay any income tax on personal loans.
But, you should note that you should have availed the loan from a legal source such as a bank or other financial agencies. It is vital to do as when you at5from unknown sources; it might be considered as a part of your income.
Personal loans also come with some tax benefits, and it depends on the usage that has been made with it.
The Income Tax Act of India permits tax deductions on loans for some purposes like education, home renovation or purchase, business expansions and more.
If you use the amount of personal loan for the buying or construction of a property, then you can claim the interest paid on it as an exemption from the taxable income. Section 24 of the Income Tax Act allows it.
As a result, if you secured an instant personal loan to renovate or buy a house, then you would be entitled to tax deductions under Section 24(b) of the Income Tax Act.
You can get deducted up to Rs.2 lakh for a self-owned home. On the other hand, the total interest paid on personal loans would qualify for tax benefits for a rented house. You need to have proper documentation that you used the loan money for your home to become eligible.
Have you used the personal loan amount for any business purpose or for buying any assets other than property? Then, the interest paid would be added to the cost of acquisition. As a result, it will lead to the reduction of the capital gains, and in turn, will let you access the tax liability.
You just went through some information on how by using the loan amount wisely, you can enjoy some tax benefits on personal loans.
If you are looking to apply for an instant personal loan, then you can enjoy the many benefits from an online lender. Have a look: