Know About Tax Benefits On Your Personal Loan
Do you know you can save tax on personal loan? Yes, you can! Personal loans do come with various tax benefits. Read to know here!
When someone is short on cash, one of the best and easiest options is to take a personal loan. A personal loan can be used for a variety of requirements, including healthcare expenditures, college fees, the dream vacation one has been waiting to take but hasn’t been able to afford or to make down-payment for a house that one has been waiting to buy.Almost all banks as well as non-banking financial companies (NBFCs) provide personal loans. In semi-urban and rural areas there is also a sizable unregulated market of moneylenders who give such credit, albeit at substantially higher interest rates.
As long as borrowers have a solid credit history and a credit score that is above average, they are eligible for personal loans without having to put up any collateral. In fact, customers can expect to receive a lower interest rate on a higher credit score. But it is best to seek a reputable lender even if there are many old banks and modern fintech startups that offer personal loans.Personal loans don’t have any end-use restrictions, but some of the ways you spend them can help you save on tax.
Some of the examples of saving on tax through personal loan are as follows:
• Business Expenses:If you take a personal loan for use in business the interest paid can be a tax-deductible item in accounts. This can help bring down tax payable by the business and save on capital of the company as well.
• Repaying For A House:Under India’s income tax laws, buyers can avail of deductions on the interest paid towards any loan, if the money is being used to pay for a house. This benefit will also be extended to a personal loan. This means borrowers can deduct up to Rs 2 lakh of interest paid from their income in a year. Assuming a tax bracket of 30%, this can translate into nearly Rs 60,000 in tax saved in a year.
• Buying Assets:When taking personal loan to buy assets such as jewellery, the interest can be deducted when computing capital gains tax, if the assets were to be sold. This helps bring down the total tax on sale of assets.
ConclusionOn its own, personal loan has not been designed to save on tax. But if borrowed for a particular end-use a person can save tax on personal loans also.
IIFL Finance makes it really easy for you to avail a personal loan and then to repay it. The company processes an online personal loan application within minutes and, if all the documents are verified, transfers the cash into the borrower’s account within 24 hours.Not only can you apply for an IIFL Finance personal loan online, you can also repay online, and flexibly at that. On top of all this, you can also avail several value-added services. And not to forget, you get the most competitive interest rates in the market and repayment tenors from three months to 42 months.