(Newswire.net — November 26, 2018) — A personal loan is an extremely useful way to get equipped with the funds that you need, when you need it. As it is an unsecured loan that is available to you readily, you cut through all the red tape that comes with taking out loans. However, the interest rates are on the higher side for the same reason.
But there are ways you can get tax exemptions on personal loans that depend on the purpose that you avail the loan for.
1) For investing in business
If the personal loan taken out is invested into a business, the interest that you pay on the loan can be claimed as a tax deductible expense. What that means is that you can subtract the interest paid out for the loan against the profits of the business so as to reduce net taxable income.
And there is no limit to the exemption limit either.
2) For purchasing/constructing/renovating a house
By investing the personal loan obtained in a house, you can claim the interest paid out for the loan as tax deductible expense under Section 24.
The interest paid out will be deducted against the Net Annual Value of the property up to a maximum limit of Rs 200,000 for purchase of self-occupied property and Rs 30,000 for home renovations. The entire interest amount paid can be claimed as deductible expense in case of rented property.
However, documentation that the loan taken out was indeed funneled into the property needs to be maintained in order to make a claim under Section 24.
3) For purchasing non-residential assets (jewelry, shares etc.)
Interest paid out on personal loans taken out for the purchase of non-residential assets are not tax deductible by themselves. However, they do add up with the cost of acquisition of said asset and in turn, reduce the tax payable for capital gains when you decide to sell the asset.
For taking out flexible and transparent personal loans at the click of the button, download the MoneyTap instant personal loan app now.