How to get tax benefits from personal loans?

Personal loans are the unsecured loans given to an individual without any collateral proofs. A credit score is the main criteria for approval of loans. These loans can be used for personal purposes like house improvement works, trips, Children marriages and so on. These loans can be stated as backup money. The approval rate is fast with less paperwork. A Certain amount of income goes under the tax. Let’s see how we can obtain the deducted amount.

Things to know before opting for Personal Loan.

  • First of all, personal loans are easy to get but are charged with more interest than business loans. If you are thinking to use the money for the business rather than taking business loans, this is a bad idea. Even if the business is small scale and does not require a large sum of money, try to apply for business loans or use own savings money.
  • Tax benefits for loans are only reflected when used for house renovation purposes only. The bills should be secured. After the work gets completed, submit those bills in the bank and it takes time for verification. If the documents are correct, then the tax amount which they deducted at the start of loan approval will be returned. These benefits won’t apply for the buildings under construction.

Not all purposes of personal loan come under tax benefits.

  • Tax benefits are not applicable for personal purposes like trips, debts and so on. Banks will not return the tax in case of usage for this kind of purposes. If we want to cancel the loan after a certain period of time, we have to pay the real amount with interest amount to break the loan.
  • Interest rates are not the same for all types of loans. Car loans will have a specific interest rate. Home loans are relatively low in interest because the tenure for repayment will be more than 20-25 years on average. Personal loans have a higher interest rate which results in we paying more amount than we took.

Approval for personal loans is hassle less and takes less time for processing. Everything has become online and for smaller amounts, applicants can apply for loans and instant approval is done in less than 1 or 2 days. Individuals have to send the scanned copies of documents online through apps or websites and once approved, the loan amount will be deposited in bank account. Tax benefits can be availed on loans taken for house renovation. The tax amount can be claimed by submitting the bills to the bank.

 

Source: https://www.tatacapital.com/blog/personal-loan/claim-personal-loan-tax-benefit

https://blog.hrblock.in/tax-planning/section-24-income-tax-benefit-interest-personal-loan/

 

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