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What if we told you that you could get some great tax deals on your loans? It’s true! Read on to find out more!
Loans can bail you out during an emergency, and if you manage your finances well, they don’t have to be a burden over a period of time. In fact, you can even get tax benefits from certain loans.
As per the Income Tax Act, 1961, certain tax benefits that have been provided to reduce the burden of tax repayment on borrowers.
Let’s look at some common loan options that offer tax benefits.
A Home Loan is one of the biggest loan liabilities that a person can avail. Although the loan amount and tenure can be high, the tax benefits that a customer reaps on a Home Loans are also pretty good.
How do you benefit?
Anyone availing a Home Loan benefits in two ways. The amount paid towards the principal repayment qualifies for a tax deduction under Section 80C of the Income Tax Act. The maximum deduction available is Rs. 1.5 Lakh since Budget 2014.
Another benefit comes in the form of a deduction for the amount paid as interest on the Home Loan. The maximum amount you can claim as interest deduction from your income for a self-occupied property is Rs. 2 lakhs.
In case the loan is jointly availed between you and your spouse, the deduction of Rs. 2 lakhs can be claimed by each of you.
If you buy more than one property, only one house can be counted as a self-occupied property. All other houses are deemed to be rented out (even if they are not rented out).
In case of properties that are deemed to be let out or are actually let out, the entire amount paid as interest was earlier eligible to be considered for deduction under Section 24B of the Income Tax Act. However, from April 1st, 2017, this will be limited to Rs. 2 lakhs. The rent received gets added to your income.
It is widely known that you can start claiming tax benefits on your Home Loan only after the construction is completed and you take possession of the property.
But wait. Did you know that you can also claim tax deductions on the instalments that you paid while the property was being constructed? Well, you can. You are allowed to claim deductions on the interest paid in five equal instalments over a period of five years from the year of possession.
Note: In case you’re thinking of selling your house within five years of buying it or from the date of taking the loan, say goodbye to your tax benefits. The benefits will be reversed and you will need to pay extra tax on your annual taxable income.
With various measures being put into practice by the government to promote higher education, people have become aware and ready to even venture out of the country to study. However, the cost of education, especially professional courses like medicine and engineering is still quite high both in India and abroad.
This is when education loans come into play. Education Loans pave the way to your future. But to be eligible for tax benefits on an Education Loan, the loan should be availed from a scheduled bank or a notified financial institution.
An Education Loan can also be availed for self, spouse or children. The legal guardian of any student can also avail this loan. This way, parents or spouses can also claim a deduction for payment of interest.
Section 80E of the Income Tax Act offers tax benefits to applicants availing Educational Loans for the purpose of pursuing higher education. However, just like with a Home Loan, only the interest amount paid towards the repayment of the loan is eligible for a deduction, and not the principal amount.
Also, there is no upper limit fixed for interest repayment. Tax benefits can be availed for a maximum of eight years or on the loan repayment term, whichever is applicable. For example, if the entire loan is repaid in six years, then the tax benefit is also limited to that term.
Note: Almost all education loans in India come with a moratorium period which is usually one year or six months after the student gets a job. Interest during the moratorium period gets accrued and is taken into account when the final monthly loan instalment is calculated by the lending bank.
A Personal Loan is a type of unsecured loan offered for a plethora of requirements. Unlike other types of loan, a Personal Loan is an open-ended loan. It’s not important for the borrower to state the purpose of taking the loan. Compared to other types of loans, a Personal Loan is a lot easier to obtain
The most common reasons for availing a Personal Loan are:
Not many know that Personal Loans come with tax advantages (depending on what you use it for) and, hence, they tend to miss out on this benefit.
Ordinarily, the principal amount and interest charges paid towards a Personal Loan cannot be deducted for tax exemptions, but you can claim deductions if you are using the Personal Loan for home renovation or to pay the down payment on a Home Loan.
Are you renovating your own house? You can claim up to Rs. 2 lakhs on interest paid on your Personal Loan.
If handled responsibly, loans can help you plan your finances better. We have fantastic offers just for you on both Home Loans and Personal Loans. Want to give them a shot?
The dictionary defines a loan as thus, ‘a thing that is borrowed, especially a sum of money that is expected to be paid back with interest’ and rightfully so, our entire civilization is built on the concepts of loaning and paying back. In modern day India, the middle class has emerged as an average marketer’s dream target, the playground for companies that deal in consumer products and consequently, the numero uno customer for the massively available loans. From homes to education, vehicles to vacations, if there is an expenditure angle involved, then there is a loan for it.
In terms of sheer volume and popularity, the banks have segregated the concept of loaning into various types. There is the personal loan, and as its name so aptly suggests, is an influx of monies that the receiver can use for whatever personal requirement or monetary contingency that he/she might have. Not surprisingly, a home loan and car loan is intended for the purchase of a home and a car respectively, while an education loan helps the borrower cope with the high prices for a competent education these days. In India, almost all private and public sector banks count the aforementioned loan products as hot commodity in their respective portfolios and competition is ripe to attract a prospective customer’s undivided attention. From varying interest rates to relaxed loan tenures, poaching strategies like the concept of home loan transfer- the shifting of home loan from one lender to another who offers a lower interest rate, to heavy discounts and offers, the string of available loan options are many.
How can anybody discriminate between these available choices? Explore, Bankbazaar.com.
The urbane loan comparison website, BankBazaar, helps you sort through a plethora of probable loan options, through a simple and eye-pleasing interface, that is focussed on bringing both the pros and cons of the associated loan plan, on the proverbial table for your inspection. Why apply for a loan with BankBazaar? The following reasons form the crux of our offering to you-