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5/27/21

Tax exemption is also available on interest paid on personal loans, find out when to avail the benefit.




To your advantage: Tax exemption is also available on interest paid on personal loans, find out when to avail the benefit.








People are taking personal loans when they need money in the Corona era. If you are one of them then you should know about the tax deduction you get on it. If you use a personal loan for a specific purpose, you can get a tax benefit on the interest paid on the loan. If you use a personal loan for home renovation or purchase and business growth, you can take advantage of an income tax deduction on the interest paid on the loan.

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Tax Exemption on Home Renovation or Purchase
Under Section 24b of the Income Tax Act, if you take out a personal loan to buy or build a home, you can claim a tax deduction of up to Rs 2 lakh on the amount of interest paid on the loan. Section 24b makes no distinction between a home loan or a personal loan and a maximum deduction of Rs 2 lakh on interest can be obtained.

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The benefit of tax deduction on taking a loan for business
If you have taken a personal loan to buy a property other than a business or property, the interest paid on it can be claimed as expenses to reduce your tax burden. This will reduce your capital gains and your tax liability.

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Tax exemption can also be availed on purchase of assets from personal loan.
If you buy jewelery with personal loan money or invest in stocks, you can get tax exemption on it. However, you cannot take a discount on the year in which interest is paid. The tax benefit will accrue in the year you sell the asset.




Will give the documents to a tax exemption on personal loan
to take advantage of the tax exemptions on personal loans you will have to show many documents. It includes documents like Expenditure Voucher, Bank Certificate, Section Letter and Auditor's Letter.

Personal loans are not considered income Personal loans are not
taxable, as the loan amount is not considered income, but keep in mind that you have taken a loan from a legal source such as a bank or NBFC.

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