A Personal Loan is a financial tool allowing borrowers access to funds for personal requirements. Whether it is an emergency travel need, a sudden cash crunch, or a wedding expense, a Personal Loan can be used for all these purposes and more. The qualifications for an instant Personal Loan are substantially less stringent than other loans and can be easily obtained online.
The primary factors to consider when taking a loan are the interest rate, tax deduction, and benefits offered to borrowers.
There are no special deductions for Personal Loans under the Indian Income Tax Act, but it doesn’t mean that tax benefits cannot be availed on Personal Loans. The Indian Income-Tax Act allows for a tax deduction on Personal Loan interest taken to fund purposes like education, home purchases, and business investments.
One way to reduce your taxes is by investing the Personal Loan in your business and claiming the interest you've paid on this loan as an expense. When you invest money in a business, the interest on that loan is considered an expense and can be deducted from the tax owed. This will lower what taxes are taken out of profits for this year's filings and will help reduce net taxable income.
You can get tax deductions via Personal Loans to purchase or construct a residential property. The borrower can take advantage of these benefits by repaying interest on the same under Section 24 of the Income Tax Act 1961. It allows for up to 2 lakhs worth of savings, as per government rules. There's no limit on how much you can claim if your house has been rented. It needs to be yours and currently occupied by someone else to avail tax benefits.
House renovation is an investment in your home. It ensures that you are living in the right conditions. A Personal Loan may be one way that bridges this gap. The government allows tax deductions of up to Rs.1,50,000 on the principal amount of the Personal Loan taken for home improvement. So, give your home a much-needed makeover and create a beautiful and comfortable space to come home to.
One can avail of tax deductions under a Personal Loan when the interest has been paid on loans invested towards assets such as jewellery, non-residential property, or shares. The borrower cannot claim this benefit for their year of payment, but it is added to its cost acquisition date. The borrower can claim the tax benefit any year they sell an asset. However, when you take out this Personal Loan for reasons other than those mentioned above, paid interest will not be eligible for claim benefits.
Eligibility criteria for Personal Loans can vary depending on lenders and the specific loan product. However, Poonawalla Fincorp has basic eligibility criteria and document requirements. All the applicants are evaluated based on these 5 main eligibility criteria for a Personal Loan:
A Personal Loan is considered a loan rather than income, so it will not be subject to income tax when you receive it. These loans might come at a higher rate than other loans but are more accessible. The application process is simple and quick. Even better, you can avail of deductions on Personal Loan interest as per the Indian Income Tax Act. When in need, choose a Personal Loan to fund your requirements and instantly avail multiple benefits.
Most people prefer buying a second-hand or used car after they turn 18 and obtain a driving license. The justification is that it is good to buy a new car after honing oneâ€™s driving skills on a used car.
And since personal loans are collateral-free loans, lenders wonâ€™t ask you for security or guarantor. It means that you are not required to put any of your personal or professional assets on the line to qualify for financing.
Loans have made our lives easier and simpler. From home loans to car loans to business loans, many types of loans are available in the market to cater to your different needs.
There would be times in your life when you may need additional funds for any personal or professional requirements.
If you have a CIBIL score of 750 and above, the chances of getting a loan at an attractive interest rate are higher. The CIBIL credit score is usually a value between 300 and 900.