When it comes to arranging some instant funds to meet any urgent needs, an instant personal loan can help you grab a higher amount at a reasonable rate of interest.
An instant personal loan can come handy during multiple phases of monetary shortfalls as the offered amount can as high as up to Rs.25 lakh. You can use it for multiple purposes as per your needs without restrictions.
Some of the standard personal loan eligibility criteria that lenders evaluate while processing the personal loan application include:
- The applicant’s CIBIL/Credit Score – anything in the range of 700-750+ out of 900 is considered excellent to get a loan approval
- Repayment history
- Income and employment stability
- Total outstanding debt
Considering the large amount that a personal loan can give, a question arises whether or not one can enjoy tax rebates on personal loans.
It’s a common thing to understand that home loans are a sure-shot tax saving instrument due to a large amount involved.
But, can you avail of some tax benefits on personal loans or not? The answer relies on what you use the personal loan money for.
As things stand today, there is no such mention of personal loan tax rebates. That a borrower can enjoy in the Income Tax Act.
Nonetheless, the interest paid is let off from tax if an individual uses the personal loan amount for the following reasons. Have a look.
For building/construction of a residential property
Anyone using the personal loan amount to construct a residential property is eligible for tax deductions on the loan’s interest component. You can avail tax rebates of up to Rs.2 lakh on interest paid for the loan. It is valid if you have decided to live in a house that you recently got constructed.
For home renovations
Are you willing to use the personal loan amount for the purpose of renovating your home? Then, you could be eligible to enjoy tax rebates on personal loans upon showing proof that the loan amount was used particularly for the purpose of renovation. The maximum personal loan tax benefits that you can enjoy under this is Rs.30,000.
For business’ usages
If you choose to use the amount availed out of a personal loan to invest in a business. The interest paid towards the loan can be termed as an expense. As a result, you can be eligible for tax deductions. However, it will be adjusted with the company’s gross and profit revenue. The applicable home loan interest rates can be lessened from an organization’s net profit. As a result, you will be left with the option of paying the taxes on the remaining profit. Your taxable benefits also get reduced leading to the lowering of your overall tax liabilities. Under this discussed provision, there is no capping on the amount of tax that you can enjoy exempted from paying.
For an asset’s purchase
If you are utilizing the personal loan amount for purchasing any assets. Then you will not be directly eligible for tax deductions. Also, the type of asset that you are buying by using the personal loan amount will also be taken into consideration. On buying immovable assets like land, property, or jewelry. The interest paid gets added to the entire cost of purchasing those. The capital gains liability will be abridged at the time when you sell off such assets. Under this arrangement or provision, there has not been defined as any limit on the amount of tax that you will be let off from paying.
As you can observe, the tax rebates on personal loans are not directly offered to you unlike home loans or education loans. Depending on what you use the personal loan amount for. You can decide the eligible income tax deductions under the sections of the Income Tax Act. If you think you have used the amount under the discussed situations. You can claim tax benefits on personal loans accordingly.