I’m planning to take a personal loan and was wondering can I claim any tax benefits on the interest I pay? I know home loans and education loans have tax deductions under certain sections, but does the same apply to personal loans too?
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Yes, you can claim tax benefits on the interest you pay-
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Home-related expenses (Sec 24b)-
If you use the personal loan for buying, constructing, or renovating a house, you may claim a tax deduction on interest under Section 24(b). The deduction limit is up to ₹2 lakh per year for a self-occupied property. However, you’ll need to show a loan certificate and some form of usage proof, such as bills or a declaration, if asked during scrutiny. -
Business (as an expense)
If the loan is taken for business use, the interest paid can be claimed as a business expense under the Income Tax Act. There’s no upper limit in this case, but you must maintain proper documentation and keep business and personal finances clearly separate. -
Investments (added to acquition cost)
If the personal loan is used to invest in assets like shares, mutual funds, or gold, the interest is not deductible right away. However, you can add the interest paid to the cost of acquisition, which could help reduce capital gains tax when you eventually sell those assets.