How to get tax benefits on personal loans in 2020
Nishant Vivek 17 April 2020
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Under the Income Tax Act, 1961, there are many provisions that can work in your favour and save you money when you borrow loans. In fact, the tax deductions on select loans can help you save up to Rs.5 lakh or more in some cases. However, to enjoy such a tax benefit on a personal loan, there are a few rules you have abide by. These are mainly linked to the end-use of the funds and knowing everything you can about this subject can prove quite useful, no matter whether you are salaried, a self-employed professional or a business owner. 
To know more about the expenses that allow you to enjoy a tax benefit on a personal loan, consider the following pointers. 
When the sanction is used to invest in your business
A major benefit to borrowing an instant personal loan is that you can use the loan amount for both personal and business expenditures without any hassles. However, if you’re looking to get a tax deduction on your repayment, one of the ways to go about it is to invest the funds in your business. Any legitimate business expenditure or one that is helpful to running your business smoothly can qualify for this provision. This is especially important if you’re a self-employed individual or sole proprietor of a small business, as you’re eligible for deduction on the interest you’ve paid. There is no maximum deduction for such a claim and it solely depends on your interest payments for that financial year.
When the sanction is used to for home improvement
Another instance in which you get a tax benefit on a personal loan is if you use the sanction for home improvement. This means that you can borrow a personal loan for home renovations and make much-needed improvements while reducing your tax liability significantly. Under Section 80C of the IT Act, you can claim up a deduction of up to Rs.1.5 lakh based on the principal amount you’ve repaid in the financial year.
When the sanction is used to purchase or build residential property
If you borrow via a personal loan and use the sanction to either fund the construction or purchase of a residential property, then you are eligible for tax deductions for the interest paid within the financial year. You can claim up to Rs.2 lakh if the property is self-occupied and this results in significant savings. Further, if you’ve opted to rent out the property in question, then there is no limit on the deduction you can claim. However, to successfully make a claim under this provision, you need to get it certified by your lender beforehand. 
When the sanction is used to acquire assets
The final instance that allows you claim a tax benefit on a personal loan is when you use the sanction to invest in an asset. These can be in the form of shares, stocks, non-residential property, jewellery, or other valuables. Interest rates on personal loan that you pay as EMI is added to the asset’s cost of acquisition and this, in turn, reduces its capital gains at the time of resale. It is only then, at resale, that you can deduct the total cost of acquisition, including interest, under Section 48 of the IT Act. 
These are all the ways in which you can avail tax benefits on an instant personal loan. All you need to do now is to find the right loan that offers both simplified processes and favourable terms. In this regard, the Bajaj Finserv Instant Personal Loan fits the criteria best and offers a personalised borrowing experience that is both quick and easy. 
Here are the features of the Bajaj Finserv Personal Loan
Access to a high sanction with no restrictions on use
By availing an instant personal loan from Bajaj Finserv, you get access to a sizable loan amount that comfortably meets your financial needs. These may include investing in assets, purchasing property or even improving your home. In addition to that, other viable expenses with this sanction include consolidating any existing high-interest debt, addressing emergencies and paying the fees for higher education. 
Risk-free borrowing experience 
Owing to its collateral-free nature, borrowing this personal loan is exceptionally easy and virtually risk-free. In addition to that, its unsecured nature also aids in quicker loan processing, making it the ideal option for instant financing. 
Cost-effective and flexible repayment plan
You also have the option to tailor repayment to your comfort. You can opt for a flexible tenor ranging up to 60 months to keep your monthly instalments within budget and minimise the risk of defaults. In addition to that, this instant personal loan is also available at attractive interest rates, which means that it is also a cost-effective option. 
Quick loan processing and disbursal with a pre-approved offer
As a pre-existing Bajaj Finserv customer, availing funding is truly simple and doesn’t require you to step outside your home, thanks to 100% digital processes. All you have to do is:
  • Check your pre-approved offer 
  • Review your pre-filled form and pre-approved sanction
  • Avail the sanction in just 2 clicks
  • Get funds in just 20 minutes!
Even as a new customer, you can apply for the Bajaj Finserv Personal Loan online and submit minimal documents to get the funds you need quickly. 
Using this information on how to avail a tax benefit on personal loan repayment and make the most of a feature-rich instant personal loan, you can access needed finances right away while saving on taxes too. Simply check your pre-approved offer to get started.
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