How to claim tax benefits on personal loans?Yes, you can claim tax deduction from interest on personal loan taken for home purpose only and renovation.1. Interest payments benefit under renovate your home. Limit: upto INR 30,000/- pa only interest Section: Section 24(b) of the Income Tax Act. 2. Property addition or renovation benefit.Limit: INR 2,00,000/- pa for interest portion only.Section 24(b) of the Income Tax Act3. Business use benefit:Section 36(1)(iii) of the Income Tax Act4. Interest on higher education abroad:Section 24(b) of the Income Tax Act. No restrictions

How to claim tax benefits on personal loans?

Yes, you can claim tax deduction from interest on personal loan taken for home purpose only and renovation.

1. Interest payments benefit under renovate your home. Limit: upto INR 30,000/- pa only interest 

Section: 

Section 24(b) of the Income Tax Act. 

2. Property addition or renovation benefit.

Limit: INR 2,00,000/- pa for interest portion only.

Section 24(b) of the Income Tax Act

3. Business use benefit:

Section 36(1)(iii) of the Income Tax Act

4. Interest on higher education abroad:

Section 24(b) of the Income Tax Act. No restrictions 

Personal loans are a great way to get money when you don't have something valuable to use as security. Even though the interest rates on personal loans are higher compared to loans with collateral, you might be able to get some tax benefits depending on how you use the loan.

Here's how you can claim tax benefits on your personal loan:

1. Interest payments benefit under renovate your home :

The interest you pay on a personal loan can give you some tax relief, under Section 24(b) of the Income Tax Act. 

For example, you take a personal loan to renovate your home. In this case, you can claim deductions of up to Rs 30,000 annually on the interest payments.

Limit: upto INR 30,000/- pa only interest 

Section: 

Section 24(b) of the Income Tax Act. 

2. Property addition or renovation benefit:

Personal loans can be handy for renovating or expanding your existing house. If the terms of a traditional home loan aren't fitting or if you're living in a rented house, a personal loan might be the way to go. Section 24(b) of the Income Tax Act allows you to claim exemptions on interest payments for property additions or renovations. 

For instance, if you decide to add a room to your house or renovate your terrace, you can claim exemptions on the interest payments. If you own the house, you can get up to INR 2 lakh per year in exemptions. Living in a rented house? You can even claim the entire interest amount.

Limit: INR 2,00,000/- pa for interest portion only.

Section: 

Section 24(b) of the Income Tax Act

3. Business use benefit:

Did you know that if you use a personal loan for your business, you can claim deductions on the interest payments? This is covered under Section 36(1)(iii) of the Income Tax Act. Let's say you decide to invest in your business by purchasing specialized equipment or increasing your inventory. 

The cool part? There's no upper limit on deductions, meaning you can claim the entire interest amount.

Cap: No limit restrictions.

Section: 

Section 36(1)(iii) of the Income Tax Act

4. Interest on higher education abroad:

If your loan is for pursuing higher education abroad, the entire interest amount is eligible for deductions. Exemption under Section 24(b) of the Income Tax Act. 

Section: Section 24(b) of the Income Tax Act. 

Cap: No limit restrictions

Note: 

It's very important to fully understand the terms and conditions of your personal loan before making any decisions. So, the next time you're thinking of a personal loan, consider these tax benefits and choose the option that aligns best with your financial goals.

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