Over the last few decades, the demand for retail loans has seen a surprising rise owing to multiple factors. For individual borrowers, the means to meet a tangible requirement is often fulfilled by a loan since the costs involved in the transaction may not be affordable. On the side-lines, we also want to maintain some amount of liquidity for those emergency situations.
In the retail lending segment, we have various types of loans available in India for specific needs. For housing, we have the Home Loan, for cars and two wheelers, Auto Loan comes handy and for all other requirements, we have the Personal Loan. Talking about Personal Loans, it is increasingly getting popular since it is easily available and comes at affordable rates. This article is aimed to help you get acquainted with the nitty grittiest of a Personal Loan followed by a section dedicated to how interest charges paid into this loan can actually be claimed as deductions under specific conditions.
A Personal Loan is type of unsecured loan which is offered by banks and financial institutions for a plethora of requirements. Unlike other types of loan available to individuals, this is an open ended loan which does not emphasize on the need for financial assistance. Compared to other types of loans, it does not come with sophisticated eligibility criteria or endless paperwork. It's a lot easier to obtain with a level of flexibility.
Nearly all major indigenous and foreign banking institutions offer this loan in India. The most common reasons for availing finance under this scheme has been provided below.
With so many benefits and easy accessibility, this loan can be the ideal answer for a variety of needs which require financial support. Depending on the loan quantum, the repayment amount including the interest charges paid is quite substantial. One of the most common questions when it comes to loan repayment is with regard to the availability of tax benefits. The principal amount and interest charges paid into the loan cannot be deducted from the income for tax exemptions since there are no relevant clauses in the Income Tax Act on this front.
The good news is that you can claim deductions on Personal Loan repayments if the loan amount is utilized towards housing requirements. The section below will throw further light on the dynamics.
This section of the act deals with “Income from House Property” where deduction towards interest paid on the borrowed capital can be claimed as an exemption from the income. The capital borrowed towards housing requirements is valid on acquisition, construction, repair and renovation. The most common misconception in the minds of taxpayers is that the deduction can be shown only on capital borrowed from home loans.
There is no emphasis on the type of loan and therefore, it can be a Housing or Personal Loan that is used to meet the requirement. The interest charges paid towards the repayment can be claimed as deduction annually for all types of housing requirements unless specified otherwise.
The taxpayer is required to preserve and provide supporting documents to prove the utilization of loan was made towards housing requirements. They are vital at the time of tax declaration during the beginning of an assessment year or at the time of providing documents as proof.
Now that you have furthermore reasons to get a Personal Loan for housing needs, it's imperative to choose a loan with maximum benefits at low charges. If you’re looking for a loan to fulfill personal needs, use the resources available on this website to compare loan offers from various banks. You can also get customized deals and low interest rates when you apply.
You can also use interactive tools such as EMI Calculators where you can ascertain the EMI and breakup of charges involved in the loan. It also helps in comparing loan offers from different banks.