Not only India but the entire world has been affected due to the Novel Coronavirus (COVID-19) Pandemic. That has led to phase-wise lockdown in India and other countries to contain the spread of this deadly virus.
Hence, when you are confined to your home, you may not find it easy to apply for tax benefits on personal loan. But nowadays, the facility of online personal loans has made that possible.
You can apply for an online personal loan from your home during the lockdown and also avail tax benefits. But, you will be able to enjoy personal loan tax benefits only if you use the money for certain purposes. Let this post guide you on this!
Here’s how you can apply for tax benefit on personal loans in India
- When you invest the loan amount in your business
One of the key benefits of personal loan is that you can use the loan money for any purposes without restrictions. And many borrowers invest it in their businesses. One of the ways to enjoy personal loan tax benefits is by using the money in your business. This way, you can avail a tax deduction on your loan’s interest that you have paid. There is no maximum deduction for such a claim. And it depends on the overall interest payments for a particular financial year that you want to claim.
- When you use the loan money for home improvements
Another way to get the tax benefit on personal loans is by using the loan money for home improvement purposes. Yes, the Section 80C of the Income Tax Act makes you eligible to claim a deduction of up to Rs.1.5 lakh. It is as per your principal amount repaid in the year.
- When you use the loan amount to buy/construct a residential property
If you use the loan amount to buy or build the residential property, then you also become eligible to ask for a tax deduction. It is for the paid interest for the financial year. If your property is self-occupied, then you can get the personal loan tax benefits of up to Rs.2 lakh. But if you have rented out the property, then there is no limit on the deductions that can be asked for. But if you want to get this processed successfully, then you will need to get all certified by your lender.
- When you use the loan money to acquire assets
The final method that lets you enjoy tax benefits on personal loans is when you use the loan money to buy an asset. Assets that you can buy are stocks, shares, jewellery, non-residential property and other valuables. The interest rate on a personal loan that you pay as a part of your EMI gets added to the cost of acquisition’s asset. In turn, this leads to a reduction in the capital gains when you resale it. The provision for the total cost of acquisition is allowed only during resale, and it includes interest. It is taken under Section 48 of the Income Tax Act.
You are now aware of all the possible ways via which you can enjoy personal loan tax benefits.
If you can find the perfect lender that provides you with many powerful features, then you can make the most of the personal loan to meet multiple needs.
Thus, always ensure to compare all lenders online before finalizing the loan deal.