Are personal loans taxable?The Income Tax Act of India allows for a tax exemption on an education loan or a home loan. However, a personal loan does not carry the same benefits. But under certain circumstances, you can avail tax benefits on a personal loan. Depending on the use of the funds, you can be exempted.
- Section 24 of the Income Tax Act states that if the loan amount is used for construction, renovation or purchasing a property then the interest paid can be claimed as an exemption from your taxable income. There is a limit of up to INR 2 lakhs on the interest paid.
- Another circumstance where you can qualify for a tax exemption is when you take a personal loan for business. If you plan on using the funds to invest in your business, the interest paid can be claimed as an exemption. There is no limit on this
- You can also be exempted from tax if you use the loan amount to invest in any other asset like jewellery, shares or any non-residential property since the interest amount gets added to the acquisition cost which reduces the capital gains on the asset at the time of its sale. Hence, the interest amount can be exempted from tax.
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The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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