If you have taken a personal loan, then you need to know that you can claim the tax benefits based on the use of a personal loan. There are certain special circumstances and if you fulfill them you can avail the income tax Benefits on personal loans.
Yes, you read it right, if you use a personal loan for a certain specific purpose then you can also get tax benefits. Now let's take a look at personal loans that can make you eligible to avail yourself of the tax benefits. When Taking A Loan For Renovation or Purchase of A HomeAs stated under section 24b of the Income Tax Act, if you take a personal loan to buy a house or construct a house, you are eligible to claim a tax exemption of up to Rs 2 lakh on the amount of interest applicable/given on the loan. It is because section 4B does not make any difference in a home loan or a personal loan and with it, exemption of up to Rs 2 lakh can be claimed on the interest. When Loan is Taken For BusinessIf the personal loan has been taken and used for business, then the interest can be claimed as an expense to reduce the tax burden. Thus it is another way to get tax benefits on personal loans. When The Personal Loan is Used to Buy AssetsIf you used personal loan money to purchase jewelry, to buy a non-residential property, then you can get a tax discount in this case too. Although the tax benefits cannot be claimed for the year in which the interest is paid, it will be available in the year you sell the asset. Thus above are the cases where you can claim tax benefits on personal loans. Now let’s take a look at what documents will be required to claim the benefits. Read also: Income Tax Benefits on Housing Loan in IndiaDocuments Required to Claim Tax BenefitsIf you want to avail the tax benefits or exemption on a personal loan then you will require to show some of the important documents. The list of documents includes vouchers of expenses, bank certificate, selection letter, and auditor's letter. That’s it, you can avail of the tax benefits on personal loans, and in this article, we shared information in a summarised way about when you are eligible to avail of the benefits and the documents required to take full advantage of this exemption.
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AuthorI am Amit Gupta. I like to write posts about chartered accountants' topic. |