Personal loans are the best form of immediate financing. For instance, you can take up a loan in case of any medical emergency, and you can borrow the funds for vacation or for wedding expenses or any other expenses which require immediate funding.

Personal loans are unsecured loans that are sanctioned faster than any other type of loan. There are certain tax benefits on personal loan interest payments that we will discuss in the blog. But first, let us answer this question –

Is a Personal Loan Taxable under Income Tax?  

The personal loan that is dispersed into your account is not considered as your income hence it is not charged under the income tax act. Even if the loan is taken from a family member, it is not taxable under Income Tax Act. 

Although there is no tax on personal loan when you put the money to some specific use like mentioned below, you can enjoy tax benefits on personal loans:

• Business Expansion

If the personal loan is used to expand the business, then the interest paid on it can be claimed under the income tax act of 1961. There is no maximum deduction amount, if you are an entrepreneur and eligible for a personal loan, you claim the amount paid as interest.

• Home Renovation Or Purchasing A New House

If you use the sanctioned amount towards purchasing a new house or renovating the old one, you can get a tax deduction on the interest paid. Deduction of up to Rs.2 lakh is allowed, if it is a rented house then the total interest paid can be deducted. You should have documents to prove all the expenses.   

• Buying Any other Asset

In this last instance, the quick loans amount is used to purchase any other asset other than residential property like gold, jewelry, shares, bonds, and including all the other income-generating properties. The interest paid is added to the cost of acquisition and the capital gain tax is reduced. The interest is not taxable on loan taken for this purpose.

There is always a way out to enjoy the tax benefit. You just have to research well and use the borrowed money wisely. These were some ways through which you can enjoy the tax benefit on a personal loan. 

Now let us understand the main features provided by some of the largest lenders of the country:

• You can get a loan from Rs.50000 to Rs.25 Lakh.
•  Interest rates can be as attractive as 12.99%
• The approval and disbursement are instant. Lenders like Bajaj Finserv provide their selected customers with pre-approved offers on products including personal loan, home loan and credit cards. Check the offer for you by entering your name and contact details. These offers are disbursed within a few minutes into the account.
• The loan tenor is flexible, you can select the tenor up to 60 months.
• The paperwork is easy as compared to other loans. If you apply online no hard copy of the document has to be submitted.
• Some lenders assure personal accidental insurance along with a personal loan.
• Online personal loan application gives you the advantage of applying for 24×7 and faster approval.

You can compare various personal loan providers based on the quotation of interest rate that will be payable to you as per your CIBIL score. Most of the providers will have add-on services but look at a provider who can help you disburse your loan with support.

With all the information stated above, you are all set to choose the best lender for the personal loan. The personal loan is used for specific purposes as mentioned in the first part, you will be able to take tax benefit on personal loans.