Which loans give you tax benefits?

Loans will help you out in a pinch, and if you handle your money well, they do not have to be a long-term financial burden. Such loans can provide tax advantages.

Specific tax incentives have been given to borrowers under the Income Tax Act of 1961 to reduce the tax repayment burden.

Let us look at some popular loan options that offer tax benefits.

Education Loans

With the government’s various initiatives to encourage higher education, people have become conscious and ready to venture out of the country to study. However, both in India and abroad, the cost of education, especially for professional courses such as medicine and engineering, remains high.

That is when instant loans for education come into play. Loans for education pave the path to a better future for you. But for the education loan to be available for tax benefits, the loan should be used by a scheduled bank or a notified financial institution.

For yourself, your spouse or children, an education loan may also be used. This loan is open to every student’s legal guardian. Parents or partners may claim a deduction for interest payments in this way.

Applicants who apply for such loans to pursue higher education are eligible for tax benefits under Section 80E of the Income Tax Act.

There is also no upper cap fixed for the repayment of interest. Tax advantages may get used for a maximum duration of eight years or the loan’s repayment term, as appropriate. If, for instance, the entire debt gets repaid within six years, then the tax gain is limited to that period.

Home Loans

A home loan is one of the essential online loans that an individual can take out. The tax benefits that a customer enjoys on a home loan are also quite substantial, even though the loan sum and tenure can be relatively high.

Anyone who uses a home loan would benefit in two ways. With Section 80C, the money charged against the principal repayment is deductible. As of Budget 2014, the maximum available deduction is Rs. 1.5 Lakh.

Another advantage comes from a deduction on the bank loan for the amount charged as interest. The maximum amount you can assert for a self-occupied property as an interest deduction from your revenue is Rs. 2 lakhs.

If the housing loan is taken out jointly by you and your partner, both of you can demand a deduction of Rs. 2 lakh.

It is generally accepted that only after the building is finished and you take ownership of the property can you start seeking tax benefits on your home loan.

 

Wait, though. Do you know that you can deduct the instalments you paid when the property was getting built from your taxes? Yeah, it is true. You are entitled to claim interest deductions paid in five equal instalments over five years from the year of possession.

Comments are closed