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  • Tuesday, December, 2020| Today's Market | Current Time: 11:29:40
  • A Personal Loan is an important financial tool for fulfilling the personal requirements. Most of the financial institutions offer personal loans to borrowers, so that they can meet their needs. A personal loan is an unsecured financial product. By unsecured, it means that the borrower can avail the loans without having to pledge any collateral or security. The Personal Loans are available at very competitive interest rates, so that it becomes feasible for the borrowers. Based on your creditworthiness, banks/NBFCs offer loans with pre-approved offers, deals, seasonal offers etc. Because of its flexibility, Personal Loans are very popular in India and it can be availed by anyone. Personal uses include wedding, education, home refurbishing, travel etc. Before applying for a loan, it is better to compare interest rates of various financial institutions, so that you can make a better decision which will help you in future as well. Since interest rates can vary from lender to lender, it can be a cause of concern for the borrowers. Hence, a borrower can consider to have tax benefits on the loans. But is it possible? Are tax deductions actually available on personal loans. Let’s find out.

    Can tax deduction be claimed on Personal loans?

    As per the Income-tax Act of India, there are specific rules and regulations on loans like home loan, business loans etc. This also includes tax deductions related guidelines. However, when it comes to Personal Loans, there are no such concrete guidelines with regards to tax exemptions. In such cases, the purpose for which the loan is ultimately being used will be considered. This can help to figure out whether the personal loan can be tax deductible or not.

    Also, if you have availed a Personal loan from any financial institution like banks/NBFCs, then that will not be considered for tax deduction as it has to repaid completely.

    Following are the instances where Personal Loan can come with tax benefits.

    1.For Business

    A person can avail a Personal loan for his business. Also, the person has to make repayments in the form of EMIs to bank/NBFC. Along with the principal, he must also pay the interest rate. This personal loan interest rate can be cut from the profit that the business makes. Since the interest component is involved in making the repayments, and since the profit amount reduces, there is a reduction in the taxable profit as well. Business is one of the end uses that can be tax deductible. Hence, a person can enjoy tax benefits on personal loan, if the same is used in business.

    2.For Purchasing a Residential Property

    According to “Deductions from Income from House Property” from Section 24 of the Income Tax Act, a person can enjoy tax related benefits on Personal loan, provided the loan is being used for buying, construction of the residential property. Also, the expenditures related to the same can be tax deductible. This basically applies to the interest rate paid and which can be deducted from the total taxable income. A person can claim up to Rs. 2 Lakhs on the interest paid on the Personal Loan. Required documents must be submitted for the same for authentication purpose and clarity of the purpose for which it is being used.

    You can apply for a personal loan on Finserv MARKETS using their website or their loan app. With funds of up to Rs. 25 Lakhs, you can avail the same through smooth online application process. You do not have to pledge any collateral while availing a personal loan on Finserv MARKETS. The process is completely transparent and there are no hidden charges. The approval can happen in just 3 mins with disbursal of the loan can be as quick as 24 hours. With repayment tenure ranging up to 5 years, you get a lot of offers as well. So apply for a Personal loan on Finserv MARKETS today!