Tax Tips: If you use your mind correctly, you can avail tax benefits on personal loans as well..

A personal loan is a loan that is easily available. For this, you do not have to deposit security and there is not much paperwork either. That is why this loan is quite popular. Everyone knows that personal loans are more expensive than other loans due to being collateral-free. But do you know that tax benefits can also be taken on personal loans?

If seen, there is no provision for personal loan deduction in the Income Tax Act. But if you use it for expenses related to home, education, or business, then you can get tax exemption in some situations. Here know the ways through which personal loans can prove to help reduce your tax liability.

Home repair or renovation

If you take a personal loan for the repair or renovation of your house, then you can take advantage of tax deduction under section 24 (b) of the Income Tax Act. In this case, you can claim tax exemption on interest payments of up to Rs 30,000 per year.

Buying or constructing a house

If you use a personal loan to buy or construct a house, you can avail tax deduction on its interest. If you live in the house yourself, then tax exemption is available on interest amounts up to Rs 2,00,000. However, if the construction or purchase work is not completed in 5 years, then this limit becomes Rs 30,000. If the house is given on rent, then you can claim tax exemption on the entire amount of interest.

Education related expenses

If you have taken a personal loan for the education of yourself, your spouse, or children, then you can claim tax deduction on interest under section 80E of the Income Tax Act. This benefit is available for a maximum of 8 years or until the loan is repaid.

Starting a new business

If you take a personal loan to start a new business or invest in an existing business, you can get tax exemption under Section 37 of the Income Tax Act by showing the interest paid as business expense.

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.