Many of you might have taken a personal loan. But they might not know that income tax exemption can be availed on personal loans as well. Do you know that tax exemption is also available on personal loans? If not, then let us tell you. Usually, personal loans are not eligible for tax exemption like other loans. But in some special cases, you can avail deduction on this as well.

If you use a personal loan to buy, build, or renovate a house. In such a situation, you can claim a deduction on interest payment under section 80c 24b 80e 371 of Income Tax. Similarly, if you use a personal loan to meet education expenses, then you can avail of tax deductions on this as well. Apart from this, tax deductions can also be claimed on expenses incurred for business.

What do experts say

According to tax expert Balwant Jain, the benefit of income tax on personal loans is available only in two conditions. First, if you have taken a loan to buy a house. So you will get a tax rebate on this. It is worth noting here that this benefit is only on buying a house and not on buying a plot. At the same time, this benefit is available only to those in the old tax regime. Secondly, if you take a personal loan for business expenses, then you have to show in the return that you have used your loan to meet the business expenses. Apart from these two conditions, there is no rebate in income tax on personal loans.

Tax deduction on interest

There is no direct tax exemption on personal loans, but if it is used for some special purposes, then you can avail tax deduction on interest. If you use a personal loan to buy or construct a house, then under section 80c of the Income Tax Act, you can take tax exemption on the principal amount of 1.5 lakhs. This exemption can be taken for one financial year. If the personal loan has been used for self-occupied i.e. a house used by oneself. In such a situation, you can get a discount of up to 2 lakhs on interest.

How to avail the tax exemption

If the house is given on rent, then you can claim tax exemption on the entire amount of interest. To avail of this exemption, the loan amount must been used for the construction, purchase, or repair of the property. If the loan is being used for renovation or repair of the house, then you can avail tax exemption on interest payment up to Rs 30,000 under section 24B. This exemption is applicable only in those cases when the property is your own.

Benefit only on interest payment.

If you have taken a personal loan for higher education of your spouse or children. In such a situation, you can avail tax exemption on interest payment under section 80C. You can avail this exemption for a maximum of 8 years or until the loan is fully repaid. This exemption is available only on interest payment. You will not get any exemption on the principal amount here. Deduction on Business Loans If you use a personal loan for business expenses, the interest on the loan can be shown as business expenses under Section 371.

Disclaimer: This content has been sourced and edited from Hr Breaking. 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.