What are the tax implications of a personal loan?

Posted on Tuesday, November 28th, 2023 | By IndusInd Bank

Are tax exemptions and deductions available for a personal loan, as they are generally available for loans like home loans and student loans?

Well, the answer is not straightforward. A personal loan is an ideal option for handling a variety of significant expenditures because they have no restrictions on the end-use. However, are there tax exemptions available for a personal loan as well. Read on to find out.

Importance of utilising tax benefits on a personal loan

Without requiring you to put up any assets as collateral, a personal loan is an adaptable and accessible choice for financial assistance. Their accessibility and versatility make them a popular choice. The best news is that a personal loan could qualify for a number of tax breaks! You can save money and obtain the assistance you require financially by taking advantage of these tax benefits. 

Basics of tax implications of a personal loan

Personal loans, according to the Income Tax Act of 1961, stand eligible for tax deductions or exemptions in India under section 80C. The catch is, it depends on how you use the funds. The following are some of the cases wherein you could lower your tax outgo: 

• Business expansion: You could utilise a personal loan to finance business expansion and increase revenue. In this case, the interest paid on the loan can be claimed as a tax-deductible expense. This would help you reduce your net taxable profits and the income tax liability. 
  
  
• Purchase or construction of residential properties: You get to enjoy tax deductions, according to Section 24 (b) of the Income Tax Act, if you are using a personal loan to purchase or construct a residential property.
  
  
• Other assets: If the funds received from a personal loan are utilised to buy assets like non-residential real estate, jewellery, stocks, or shares, they may qualify for tax exemption. The interest component can be included in the asset’s acquisition cost. By doing this, the capital gains from selling the asset are reduced. The interest will be incorporated into the acquisition cost but cannot be deducted by the borrower in the year it is paid. Only once the asset is sold can the borrower take advantage of the tax deduction.

It is crucial to remember that the tax deduction is restricted to the interest paid, not the loan’s principal. No tax benefits will be given on the personal loan if it has been requested for any other reason than those listed above. 

Why choose an IndusInd Bank Personal Loan?

IndusInd Bank gives excellent personal loan deals if you’re considering applying for one. The entire process is marked by no paperwork, quick processing, and immediate fund disbursal. No need to stress about providing security or collateral! You can apply for as much funding as you require, with loan amounts that range from ₹30,000 to ₹5 lakh. The best thing, though? The interest rates are truly attractive! Not only that, but you can also choose the repayment terms that best suit your budget because they are flexible. Take a look at all the reasons why an instant personal loan from IndusInd Bank could be your best option:

• No documentation: An instant personal loan from IndusInd Bank comes with no documentation, quick processing, and quick disbursals. 
  
  
• Flexible tenures: You get to apply for a personal loan online and pick a loan tenure that is convenient for you which may range between 12 to 48 months. 
  
  
• Additional features: You may take advantage of the low personal loan interest rate, and so much more with a personal loan from IndusInd Bank. 

As you can see, obtaining a personal loan can be a fantastic way to get additional funds when you require them. Your Aadhaar Card and PAN Card information are all that are needed when applying for a loan. Additionally, benefits like flexible tenure and low-interest rates make it a viable option for paid individuals with stable but constrained revenues. You can use the IndusInd Bank Personal Loan EMI Calculator to simplify things and gain a better grasp of your finances. 

Find a solution to your financial problems with simplicity by applying for a hassle-free, instant personal loan from IndusInd Bank right away. 

Conclusion

There are a few situations where a personal loan is free from taxes. For queries on tax benefits related to your loan’s purpose, consult your lender or a tax expert. Make sure you have sufficient documentation demonstrating how you spent the proceeds from your personal loan so that you can easily and legally take advantage of the tax benefits such as deductions and exemptions. 

Now that you understand what the tax implications are for a personal loan, what are you waiting for? Apply now to get an instant personal loan with IndusInd Bank!

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.