A personal loan can be taken for any use like financing wedding expenses, medical expenses, trips, renovation or construction of the house, etc. But a personal loan cannot be taken for speculative purposes. However the lenders are not concerned with the use of the loan and no guarantors or security or collateral is required.
Does the personal loan qualify for tax deduction benefits? The principal repaid does not qualify for tax deduction benefits. However, under Section 24 of the Income Tax Act, the interest paid for a personal loan taken for acquisition, construction and renovation of the house can be claimed for tax deduction up to Rs. 1.5 lakh. The borrower can claim tax benefits only after the construction is completed and possessing the property.
While claiming deduction the borrowers may need to show the certificate of completion of construction of house property. If this is not available then the proof of occupation by a certain date such as electricity bills, telephone bills etc. can also serve as a good proof of completion and occupation.
Thus you can fulfill your dreams by taking a personal loan and also claim tax deduction benefits.
October 17th, 2008 at 5:26 pm
Thanks for clearing my doubt about the tax deduction on personal loan. With increasing interest rate and no tax benefits available on personal loan it is not affordable to take a personal loan.
November 13th, 2008 at 5:26 pm
Thanks to add to my knowlege that personal taken for renovation could be cliamed for tax deduction. This information may attract lot of us. Requesting to write more just informative piece even on other loan products like home loan, credit and card car loan.
November 18th, 2008 at 8:04 pm
So it means only when you take personal loan for an objective for or acquisition, construction and renovation of the house can be claimed for tax deduction under this section. So personal loan taken other then this objective will not be eligible for any tax deduction.
November 19th, 2008 at 9:34 am
Yes, Rahul you got it right.
Raima, Personal loan should definitely be the last resort as it is expensive.
November 19th, 2008 at 8:33 pm
Personal should not be taken for construction only to get tax deduction. The first obvious reason is that the interest rate is too high, Second you have many other option like Home loan, loan against property
November 20th, 2008 at 12:11 am
I always thought that only home loans and educational loans are eligible for tax deductions. So a personal can be taken for the purpose of saving tax…