The Income tax Act offers tax benefits to those repaying the loans that they have taken to finance a home, vehicle or even their education. Here are a few loans with tax benefits to be aware of:
- This deduction is available for interest paid on the education loan taken to finance the education of self, spouse or children. The deduction is available under Section 80E.
- The loan must be from an authorised financial institution for higher studies in India or abroad after completing senior secondary school.
- Tax deduction can be enjoyed either for the entire duration of loan repayment or upto 8 years, whichever is earlier
- There is no defined limit of interest to claim tax benefits
- You can claim upto ₹1.5 lakhs on the principal of your home loan as per Section 80C. However, this deduction is applicable only when the construction is complete on the property, not when it is being constructed.
- Under Section 24, you can claim a tax deduction of ₹2 lakhs on the interest paid for the home loan, in the case of a self-occupied property. In case the property has been let-out on rent, there is no limit to the deduction that can be claimed on the interest paid.
- If a joint loan has been taken, each is eligible to claim deduction on interest paid upto ₹2 lakhs each. Moreover, each is also eligible to claim 80C deduction on the principal amount for ₹1.5 lakhs each.
- Self-employed individuals can save tax as per Section 80C towards auto loans taken for vehicles used for commercial purpose such as running a business
- Budget 2019 announced tax deduction upto a maximum of ₹1.5 lakhs paid towards interest on a loan taken to buy an electric vehicle on or before March 31 2023.
- When a personal loan is used to invest in your business, the interest paid can be claimed as a business expense, which can reduce your taxable income.
- A personal loan used to buy shares, jewellery or non-residential property can also provide tax benefits since the interest paid adds to the acquisition cost. This leads to reduced capital gains tax upon sale.