Whenever we apply for loan, we aspire for some tax benefits from it. Under the Indian laws, there are tax benefits on repayments of a loan. This blog will help you to have a good understanding about the deductions. As the name suggests, ‘personal loan’ is available for any personal reason such as paying down payment, meeting marriage expense, financing higher studies so and so.
When we talk about personal loan, it is available for any personal reason like paying down payment, meeting marriage expense, financing higher studies so and so. However, tax benefits are available on some special grounds only. Let’s find out the same to avoid any confusion-
When personal loan is availed for any business purpose
Yes, if you invest the borrowed personal loan amount for a business purpose, then you can claim tax deduction on interest portion of your EMI.
When personal loan is invested for purchase of any other asset
Other assets denote machinery, jewelry, shares etc. In this case, tax benefit is allowed in the year in which the asset is sold, not when the same is purchased. The deduction would be allowed on the personal loan interest component only. The same would not be allowed on the repayment of the principal component.
Often people get confused with the tax benefits on the amount availed for purchase/construction of a residential house. If you claim for tax deduction, you need to show interest certificates. In case of home loans only, Banks and N.B.F.Cs issue interest certificates to clients. The certificates display the amount invested for housing purpose.
So, next time don’t become surprised, if one talks about tax benefits on personal loans. If you are going for personal loans, ensure to claim your tax deduction to save some extra bucks.