Tax exemption on personal loan interest component in India
In the Indian Income Tax Act, there is no specific deduction allowed for a Personal Loan. However, there are deductions allowed for other loans which are used for a specific purpose like Education Loan, Home Loan, and Business Loan etc.
Is interest on personal loan tax exemption?
Here, you can claim the interest you pay towards the loan as a tax-deductible expense. Buying other assets: Purchasing certain assets such as jewellery through a personal loan offers tax benefits. The interest that you pay on this loan is considered the cost of asset acquisition.
Is personal loan interest tax deductible in India?
According to Section 24, interest paid for funds acquired through a personal loan can be deducted from the net taxable income from residential property. Section 24 will apply if the money is used for purchasing, constructing or renovating the same property.
Is personal loan covered under 80C?
Tax benefits on personal loans
In case of house improvement and construction of property, you can claim deductions under Section 24 and Section 80C as mentioned above – so yes, if personal loan funds are used towards these purposes, you will be eligible for exemptions under Section 24 and 80C.
Which loans are eligible for tax exemption?
Let’s throw light on three important loans that qualify for a tax rebate as per the provisions of the Income Tax Act, 1961.
- Education Loan Repayment: Deductions Under Section 80E. …
- Home Loans: Deductions/Subsidy Under Section 80C, Section 24, 80EE, 80EEA, CLSS. …
- Personal Loans: Indirect Deductions as per Use of the Loan.
Can I claim deduction for personal loan?
Though there are no deductions for personal loans tax benefits can still be availed if the loan is taken for reasons like business investment, purchase/construction of residential property, and purchase of assets for which deductions are permitted.
What is Section 24b of Income Tax Act?
Section 24b of income tax act allows deduction of interest on home loan from the taxable income. Such loan should be taken for purchase or construction or repair or reconstruction of house property. Such deduction is allowed on accrual basis, not on paid basis.
Which loans have tax benefit?
Different types of loans offer different types of tax benefits or tax savings. These could be housing loans, education loans, personal loans, or even car loans. Most of the tax deductions are on the interest and not on the principal amount.