Tax Benefits of IDFC First Bank Personal Loans

A personal loan is a type of unsecured loan that covers several things such as vacation expenses, medical emergencies, etc. It shields several other charges that might occur during the lifetime. The personal loan might be a bit expensive but the best part is that there are not many restrictions on it. However, there are several tax benefits that one can claim due to a personal loan. But it has some terms and conditions since it is not available on all IDFC first bankpersonal loan types.

Tax Benefits on Personal Loan

When it comes to personal loan tax benefits than the purpose of taking the loan is considered. If the purpose falls under the criteria of tax benefit only then the consideration will proceed further, otherwise, it will not move forward. These are the major cases for which personal loan tax benefits are reliable.

1. Business purpose - It is one of the major considerations that is done while taking a loan. So, if the amount of personal loan is invested in business then one can easily claim the total interest as expenses. As a result, the business net taxable profit is reduced which will result in tax reliability reduction. The maximum amount is not considered in such a case that can be used as an expense.
2. Purchasing assets - There are cases when personal loan are claimed for the purchase of jewellery, house, shares, etc. In such a case, the amount of assets acquisition considers the interest amount. However, for a year after purchase, the deduction will not be put into effect. But it will be added to the tax benefit and cost of acquisition which will result in an increase of the total gain and return amount.
3. Real estate property construction/purchase - Under Section 2, the deduction is allowed if the amount is invested in construction or purchase of a property. However, due to its similar nature in the home loan, it raises a lot of questions for the deduction. In this, the majority of CAs believe that the return on the total deduction is required for such investments. For self-occupied houses, the total amount of INR 2 lakh has a deduction policy. However, let out or rented property has no maximum limit for personal loan deduction.

These are the major tax benefits that can be claimed after IDFC first bank personal loan. There are no deductions when it comes to repayment deductions and is completely focused on interest amount only.

Points to remember as a tax benefit for personal loans

1. Since the amount received is a loan and not an income, there will be no tax that is levied up for the customer
2. It is vital to have all the copies of documents submitted during the time of raising personal loan when it comes to claiming income tax. The documents must also have papers of total amount taken, interest, amount, etc.
3. The proof that determines that the amount is used for the specified reason only. If the purpose is different than mentioned above then there will be no claim on tax for interest.