Is there any Tax Benefit on Personal Loan?

Wondering if personal loan is considered one among tax saving instruments? This article can help you with your query.

1 Dec,2016 10:00 IST 1726
Is there any Tax Benefit on Personal Loan?

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, jewellery, 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.

Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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