New Delhi: Depending on the use of personal loan, tax benefit can be given on that too. While taking a personal loan, it is not necessary for a borrower to state the purpose of that loan as it is an unsecured type of loan. But, you can get tax benefit if you use a personal loan for a specific purpose.
If a personal loan is used for business, then the interest paid on it can be claimed as an expense to reduce its tax burden.
If you are using it to buy, build, or renovate a home, then you can claim for interest on the interest given on your personal loan. Section 24b does not make a difference between a home loan or a personal loan and interest can be deducted at the most by 2 lakh rupees.
If you are taking a personal loan to buy an asset, then you can claim tax exemption on its interest. However, you cannot take this discount only in the year of purchase of asset.
To get the tax rebate on personal loans, you have to show many documents. For example, voucher of expenses, bank’s certificate, selection letter and auditor’s letter.