Personal loans are unsecured loans that are collateral-free. They offer a convenient line of credit to borrowers to fund their expenses. Be it a holiday, a wedding, a medical emergency, investment or home renovation, a personal loan can be availed of whenever any expense pops up.
In order to help the personal loan industry, the government offers tax benefits on the interest payment on personal loans if it is used for specific purposes. It is financially prudent to know the tax benefits available to you before deploying the personal loan. If you have two expenses, one which has a tax benefit and the other which doesn’t, it will make a lot of sense to fund the one with tax benefit through the personal loan route.
Personal loans do not come under tax purview as they are not treated as income. Remember, it is better to opt for an organised lender instead of borrowing from family or friends. You run the risk of the amount of loan being added to your personal income.
You can claim benefits if you have used the personal loan for the following purposes –
- Home Renovation/Repair or purchase
- Expansion of Business
- Investment in other assets
Let us examine how you can benefit from each of the above cases.
Home Renovation/Repair or purchase
In case you use the personal loan for home renovation or repairs, you can claim a deduction of up to Rs 30,000 on interest paid on a personal loan from the taxable total income. You will have to produce the necessary receipts and proofs to the lender for the issue of the interest certificate.
In case you have used the personal loan for the purpose of purchasing a residential home, you can claim interest up to Rs 2,00,000 on the personal loan as a deduction.
Expansion of Business
If you have used the personal loan towards the expansion of your business, you can claim a tax deduction on the interest paid on the personal loan. However, the investment must have been used to grow the revenue of the business. You will have to submit the necessary documents as proof of utilisation.
Investment in other assets
In the case of investments in other assets like non-residential property, gold, vehicle, shares etc, the interest paid on the personal loan can be added to the cost of asset acquisition. This will give you a benefit when the capital gain calculation is done at the time of sale.
Now that you know that a personal loan can also offer tax benefits, we can check out how easy it is to apply for a personal loan at LoanTap.
If you are an Indian citizen or resident over the age of twenty-one year and earning a net monthly income of over Rs 30,000, you are eligible for a personal loan.
- In the case of salaried individuals, it is the net monthly take-home salary after deduction of taxes
- In the case of self-employed individuals, it is the profit after tax.
All you need to do is to fill up an online application form on https://loantap.in/ and upload the following documents –
- PAN Card
- Aadhaar Card/Passport/Driving Licence
- Salary slips of the last three months
- Bank Statement of the Salary account for the last six months
The LoanTap team will evaluate the application and if the loan eligibility parameters are found satisfactory, the loan will be disbursed within 24-36 hours. There are several repayment options to choose from and you can pick them according to your convenience. Once you have serviced the loan for six months, you can choose to foreclose or prepay your loan without any prepayment penalty. This is one of the most convenient and hassle-free options available. If you use the personal loan for the above-mentioned purposes, you stand to get the added benefit of tax savings as well. If you are planning to get your home renovated, investing in assets or expanding your business, do visit https://loantap.in/ and we can help you to get the right personal loan to best suit your needs!