Income Tax Benefit on Interest on personal Loan, Section 24
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Section 24 – Income Tax Benefit on Interest on Personal Loan

Escalating realty prices have left borrowers struggling for money even to meet the down-payment requirement. If you have resorted to a personal loan to bridge the gap between housing loan and down-payment, then there is a glimmer of hope in terms of a tax benefit.

Typically interest paid on personal loan taken for consumption purposes is not available for deduction. But what matters here is the end use of the funds and not its source. Under the Income Tax Act, as per  income from house property is computed after deducting the interest paid on borrowed capital, using which the property has been acquired, constructed, repaired, renewed or reconstructed.

So the Act per se does not distinguish on the type of loan – whether home or personal loan – used to meet the requirements of purchasing or refurbishing a property.

The principal amount repaid on the personal loan cannot be claimed for deduction unless the loan was taken from a bank or other prescribed lender. Nonetheless, the interest amount paid annually for a personal loan taken to acquire, renew, repair or reconstruct a house property can be claimed for deduction.

For self-occupied properties interest amount up to Rs 1.5 lakh can be claimed, while there is no such ceiling applicable if the taxpayer has purchased a second property, which is let out.

Note that the interest portion cannot be claimed as a tax deduction if the property purchased is at the construction stage.

Also, preserve the bills as one would have to prove that the borrowed sum was utilised to pay for the home or home repairs to claim the deduction.

 

How H&R Block can help you?

Saving taxes and e-filing of income tax return accurately becomes very easy when you have professional help. This is where we come into the picture. You can either use our intuitive tax filing platform to easily file your tax return or let our tax experts file it for you. At H&R Block we have a team of in-house tax experts who can file your income tax returns online accurately while giving you maximum tax benefits.

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CA Madhuri Marne
CA Madhuri Marne
Madhuri is a tax expert at H&R Block (India) with over a decade of professional experience. Having co-authored a book on economics for the ICAI exam, she now enjoys writing about tax-related topics in a simple and easy manner. Outside of work, Madhuri is passionate about teaching students who are appearing for professional exams.