Loans are necessary hazards!
Whenever the question of claiming Income tax benefits on loans comes up, the only answer people normally think of is home loans. You pay humongous amounts of money towards what you call your dream house and it’s great that the government allows you tax benefits on your home loans. The government has always insisted upon investing in a housing which is why provisions have been made in Section 80C for people to claim tax benefits for the same.
But did you know that home loan is not the only loan type that can help you with your tax benefits? In fact, there are 3 more types of loans for which an individual can claim tax benefits. Let’s have a look at all the various types of loans that can help you with income tax benefits on loans.
Home loan is the biggest and heftiest loan, individuals avail on the purchase of their dream houses. Considering the fact that these loans are always expensive and with the joy of owning a house, they also bring a burden of cutting down your expenses, it’s only commendable that the government has put in place provisions to provide tax benefits against home loans.
Following are some the salient points you need to know with respect to taxation on home loans.
- The validity of tax deduction for home loans only stands when the construction of the property, for which the loan has been availed, is complete. The tax deduction is not invalid if the property purchased is under construction.
- Principal, as well as interest paid on home loans, is eligible for tax deduction.
- The tax benefits towards home loans are available under Section 80C, to a maximum of 1,50,000 rs and up to rs 2,00,000 on the interest paid under section 80C, in a single financial year.
With the increasing emphasis on higher education, today people are not shying away from taking education loans and giving their children the best and quality education that’s out there. And that takes into consideration moving out of India as well. While that has done good for the economy as a whole, the cost of education is still pretty high. And what you do to meet that? You take an education loan.
Now, education loan amounts vary quite a bit depending on what you want to study and where you want to study. And that’s why the government has certain provisions to ease this burden on you by helping you save income tax on your education loans. Below are some of the things you’d want to know about taxation on education loans.
- Tax benefits on education loans are only applicable if the loan is taken from an approved institution.
- The tax benefits are offered under Section 80E of the Income Tax Act.
- Only the interest paid towards loan repayment will be eligible for deductions.
- No limit on maximum interest amount on which the tax deduction can be claimed.
- Benefits can be availed for either the full loan repayment period or for a maximum of 8 years, whichever is earlier.
- A moratorium period of 1 year to six months after the student gets a job, is available with almost all institutions. That is, for this time period, the students won’t be charged anything and the interest of this period will be accrued once the instalment starts.
Car / Auto Loans
Even if you’ve taken a loan to realise your long-awaited dream of owning a car, because it’s a luxury item, the government offers no tax benefits on it.
The only way by which income tax benefit can be availed on car/auto loans is if you’re self-employed and if you use the purchased vehicle for commercial purposes. It then enables you to claim tax deductions under section 80C of the Income Tax Act. Also, in this case, the car needs to be registered either in the name of the business or the business owner.
Similar to the car loans above, personal loans can also allow you to claim tax deductions, only if they’re taken for business reasons. Other than this one case, personal loans do not offer any tax relief.