When you are looking to apply for an instant loan online, you will observe a variety of loan types available based on purpose and loan amount needed. However, did you know these loans can also bring tax benefits or savings? Yes, you have heard it right. Besides helping solve your cash needs during an emergency or particular investment, loans can offer tax rebates as per Income Tax Act, 1961. The loan types include Housing Loans, instant Personal Loans, Education Loans, Vehicle Loans, etc.
Let us see the types of loans that offer the best tax benefits that can reduce your financial burden by a considerable margin.
Here are three types of loans that offer awesome tax benefits
1. Housing or Home Loans
Most people’s dreams include owning a beautiful house where they spend their life happily with their loved ones. However, it is almost impossible to build a home just with the help of savings as the investment is usually on the higher side. Hence when people apply for an instant loan online, it’s generally for building a house or purchasing a flat. Individuals who have taken a home loan to buy a residential property can avail of tax deductions on the principal and the monthly interest amounts paid against the loan.
According to Section 80C of the Income Tax Act, 1961, an individual can apply for tax deductions on the principal loan amount up to a maximum of Rs 1.5 lakhs. However, an applicant can claim tax deductions under this section only after the house or residential property has been constructed and not before that.
Homebuyers can also claim tax concessions under Section 24 of the Income Tax Act 1961 with respect to the monthly interest paid towards the housing loan under the following conditions:
- Tax concessions up to a maximum of Rs 2 lakhs can be availed provided the construction of the house or residential property has been completed before three years have elapsed from the fulfilment of the financial year during which the housing loan was approved.
- If the above condition is not satisfied, then the amount of tax concession allowed is only Rs 30,000.
- For housing loans taken for renovating or repairing an existing residential property, applicants can claim tax concessions as per Section 24(b) to Rs 30,000 per fiscal year.
2. Education Loans
Learning is a lifelong process, and so is education. If you have apply for a instant loan online for your higher education, you can claim tax benefits and deductions prescribed in Section 80E of the IT Act, 1961, on the interest paid towards the loan amount. The tax claims can be applied for up to eight years on educational loans for higher education. However, it is vital to note that tax concessions can only be claimed on the interest amount paid and not on the principal amount of the education loan. Also, tax concessions can only be claimed up to the duration the education loan is paid out or eight years, depending on which takes place sooner.
3. Personal Loans
When you need funds for emergencies like medical issues, prepayment of other loans, etc., or happy occasions like a wedding, then instant Personal Loans are the best option as they are approved quicker than other types of loans and don’t require any collateral. Individuals who have acquired instant Personal Loans from traditional lenders or other financial institutions can also avail of tax deductions and benefits on the interest repayments against their Personal Loan amount. However, these concessions do not apply to the Personal Loan’s principal amount. Tax deductions on instant Personal Loans are valid only under the following conditions:
- If the Personal Loan is used to buy, renovate, or construct a house, tax concessions can be claimed on the loan amount up to a maximum of Rs 2 lakhs according to Section 24B of the Income Tax Act, 1961.
So, now that you know, whenever you apply for an instant loan online, you can prefer loan types that offer maximum tax deductions and benefits to reduce the burden of repayment to a considerable extent.