What is a loan? What is a personal loan?
A credit or loan means giving money to another person where he is obliged to pay back the full amount with a certain percentage of interest to the lender monthly called the EMI. A personal loan is an unsecured credit, in which no collateral is exchanged for the creditor while the borrower gives the fund. A personal loan can be used for large purchases, as you have a lower rate than credit cards. For many purposes, a personal loan can be used, be it for marriage, meetings, holidays, or shopping. The personal loan interest rate is low as compared to the interest of a credit card.
Standard chartered bank personal loan is a good option available in the market with a decent interest rate. The personal loan interest rate of the standard chartered bank is 11.50% to 18.00%.
Which purposes have a tax benefit when you use a personal loan?
Some of the tax benefits are :
Business investment
If the money was used to start a business, the interest charged by a personal loan can be charged as an expense. The tax burden on the borrower and the net taxable income of the enterprise in which it has invested will be reduced. In this case, the amount that can be claimed is not limited.
Building or buying residential property investments
Where the borrower can be eligible for tax benefits when using a personal loan for the purchase or construction of a residence. The creditor may request tax benefits for payment of interest under section 24 of the Revenue Tax Act 1961.
Investment in assets
The last type of situation in which one can benefit from tax deductions in the form of personal loans is that of jewelry, non-residential property, investments, stocks, etc. In the same year in which the interest is paid by the borrower but is added to the purchase costs, the interest may be claimed. In the year the borrower sells the asset the tax may be claimed. The tax deduction cannot be applied to the main amount, but only the amount of the interest is available. If for any other reason not specified above, the personal loan is applied, the tax deduction benefit shall not be paid on the personal loan.
In personal loan - which use doesn’t avail the tax relaxation benefits?
For buying a new automobile
There are currently certain loans available in the market, such as car credits, 3 wheeler loans, 2 wheeler loans etc. After paying installments, people can get the vehicle in their hands.
Filling other loans
People make money when they need it, and when they can't pay them back on time, they take out another loan to pay them off.
For wedding events
People can use personal loan funds for their marriage
Lowers burdens
If a person takes an individual credit to pay the burden they have incurred, they can use that credit to pay the reimbursement amount. When people can't pay their other loans' EMIs, they can use funds from a personal loan to pay them off.
Educational use
If people can't pay their fee, they pay it. They pay it using the loan.
For medical purpose
People who don't have enough money will take out a personal loan to pay off their debts... A personal loan can use this at any time. These are easily available and easy to apply.
Conclusion
One can get the tax relaxation by using a loan only for the following purposes. Business investment, Investment in assets, Investing for building or purchase of the residential property.
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