3 Loans That Can Give You Great Tax Benefits

By Bank Bazaar | September 21, 2017

Loans That Can Give You Great Tax Benefits

What if we told you that you could get some awesome tax benefits on your loans? It’s true! Read on to find out more!

Home Loans

Owning a home is a coveted dream. However, real estate prices are in constant flux, making it difficult for many to buy a home, or even a piece of land, with just their savings.

Home Loans are meant to bridge this gap. Home loans can give a home buyer several benefits in the form of tax breaks. Did you know about these tax benefits on Home Loans?

Additional Reading: Benefit From A Drop In Home Loan Interest Rates In 2017

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.

Another benefit comes in the form of 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.

Additional Reading: Tax Deductions Demystified

Buying a second home?

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 the loan is jointly availed between you and your spouse, the deduction of Rs 2 lakhs can be claimed by both of you.

In case of properties that are deemed to be let out or are actually let out, the entire amount paid as interest was 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.

Additional Reading: The Pros And Cons Of Buying A Second Home

Education Loans

Education Loans pave the way to your future. These loans can be availed by students aspiring to study in India or abroad. But, wait! 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 deduction for payment of interest.

Additional Reading: Education Loans – Things To Think About

How do you benefit?

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 8 years or on the loan repayment term, whichever is applicable. For example, if the entire loan is repaid in 6 years, then the tax benefit is also limited to that term.

Personal Loans

Not many know that Personal Loans come with tax advantages and, hence, they tend to miss out on this benefit.

How do you benefit?

You can avail tax benefits on Personal Loan if you have taken it for home renovation or to pay the down payment on your Home Loan. If you use a Personal Loan to finance home renovation or repairs, claim these expenses as tax deductions.

Additional Reading: How To Avail Paperless Personal Loan

Are you renovating your own house? You can claim upto Rs. 2 lakhs on interest paid on your Personal Loan.

Additional Reading: Personal Loan Handbook: All Questions Answered

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?

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15 thoughts on “3 Loans That Can Give You Great Tax Benefits

  1. Piyush Bose

    Excellent Note………………………………………………….For Service Personal as well as business man.

    Thanks for your valuable input

    1. Team BankBazaarTeam BankBazaar

      Dear Piyush,

      Thanks for your valuable feedback. Please keep reading our blog.

      Team BankBazaar

  2. nitin walse

    Is insurance policy change if I purchase car on my firm name will u tell us difference when purchase vehicle on personal name and firm name

  3. shreekanta

    i dint get house loan on construction of my house. then i took personnel loan to construct my house. under section 24 i will be eligible to claim deductions ????if yes apart from Provisional Interest / Principal Certificate from the bank what more documents should i keep ready to claim my interest and principle under home loan.,

    1. Team BankBazaarTeam BankBazaar

      Hi Shreekanta, While we do provide general tips and advice on personal finance, we will not be able to provide guidance on specific queries. We would love to help but due to the specific nature of your question, we suggest that you get the help of a chartered accountant to clarify this.

  4. sujit kumar

    If a person having personal load & LIC is it help tax benefit…….

    1. Team BankBazaarTeam BankBazaar

      Hi Sujit, While an LIC policy does have tax benefits, your Personal Loan is solely dependent on these few things;
      1. If you’ve taken a Personal Loan for a home makeover or towards a Home Loan.
      2. If you can prove the expenses for the same.
      3. If renovation is the purpose, you can claim tax benefits of up to Rs. 1.5 lakh on the interest amount
      4. There is no cap on the interest amount eligible for tax benefits if you’re renovating a house given out on rent.
      Do visit our blog for more information, and also download our mobile app for latest news and updates.
      We hope we’ve answered your query.
      Team BankBazaar”

  5. Chellappa

    I have a personnel loan used for clearing my old debt. do i get tax rebate for this.

    1. Team BankBazaarTeam BankBazaar

      Hi Chellapa,

      There is no rebate for a Personal Loan unless you took it to renovate your home or in the name of your business.

      Team BankBazaar

  6. San

    I have taken vehicle loan , do I get tax rebate on the principal loan amount I will be paying for a particular fiscal year?

    1. Team BankBazaarTeam BankBazaar

      Hi San,

      There are no tax benefits for vehicle loans unless you have a business and the vehicle was purchased in the name of your business.

      Team BankBazaar


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