When it comes to income tax benefits, home loans are the only ones offering the same. However, it’s a misconception that only housing loans can provide tax exemptions.
Borrowers can also enjoy tax benefits on personal loan ; however, there are a few occasions when these exemptions are applicable.
These include –
1. Using it for business expenses:
An individual can use an online personal loan to use in business expenses like boosting working capital, purchasing equipment, or the expansion operation. In such cases, an individual is eligible to claim personal loan tax benefits.
2. Using it for housing expenses:
According to Section 24(b), if an individual uses a personal loan to purchase, renovate or construct a property, then he/she can claim the tax benefits on the interest paid. The benefits available will be subject to the personal loan interest rates.
It should be noted here that then the maximum amount that can be claimed as an exemption is limited to Rs.2,00,000.
3. Using it to buy assets:
If an individual uses the amount of loan to buy a valuable asset, e.g. cars, jewellery, etc., then the interest paid will become a portion of the cost of acquisition.
However, income tax benefits will not be available immediately. The same can be availed when these assets are sold off.
These are the three occasions, where one can receive tax benefits after availing a personal loan. Applicants must ensure to meet the personal loan eligibility criteria to be able to avail the funds quickly. One such criteria is the credit score. Borrowers must know how to check CIBIL score so that they can hold CIBIL score of a minimum 750 to receive approval of their loan.
Additional Read: Know How To Get Tax Benefits From Personal Loan
Aman Khanna is an experienced financial advisor who is well known for his ability to foretell the market trends as well as for his financial astuteness. He has an MBA in finance from Toronto University as well as years of experience delivering seminars on sound financial practices and debt management.