What Are The Tax Benefits On Personal Loans?

08 Aug 2021|

1 min read |

by ICICI Securities Team

INTRODUCTION:

The benefit of a personal loan is that there is flexibility. It means you can determine the end-use of it. You can use a personal loan for any purpose. It can cover medical expenses, business, wedding, education costs or costs towards construction or repair of a house. It can be used to meet any such unprecedented financial emergency. Usually, in the case of such an urgency, a personal loan is considered hassle-free. You require minimal documentation to get an instant personal loan. Your bank may look at the following factors:

Your Creditworthiness
CIBIL score
Monthly record of salary or copies of bank statements if you are self-employed
Age
Overall loan repayment record

Now you may wonder that since a personal loan is an unsecured type of loan, it does not come under the purview of your taxable income. It also does not form a part of your income during tax calculation, so how can you avail of the personal loan rebate? The answer to this simply lies in the end-use of the personal loan. For instance, if you use the money towards repairs or construction of a house, then you can claim a tax deduction or personal loan rebate under Section 24(b) on the interest paid on the personal loan. You need to prove that the money was used for repairs and renovation.

Here are some specified purposes under which you can receive a personal loan tax benefit:

Construction, renovation, reconstruction or repair of residential property:

You can claim a tax deduction if you have used the personal loan to construct, renovate, or repair residential property. That would be between the exempted limit of Rs. 30,000 to 2,00,000 as per Section 24 (b) of Income Tax Act. The deduction is for the interest payable on the loan.

Business expansion:

A personal loan can also be used for funding or expanding your business. It can be used to generate revenue for your business, and the interest you pay on this loan can be considered as business expenses that can be deducted, thereby reducing your tax liability.

Therefore, you need to know the specified use of the personal loan you have availed and the benefit of exemptions you are entitled to as per the Income Tax Act provisions. Once you have ascertained its use, you can claim the tax benefit and reliefs on the personal loan.

CONCLUSION:

You do not have to give a collateral for a personal loan. It is an unsecured type of loan. To avail the benefit of tax deductions on a personal loan, all you need to know is the specified end use of the loan and keep documentation ready. You may need that if there is a scrutiny of your returns in the future.

Disclaimer

ICICI Securities Limited has its registered office at ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400025, India, Tel No:- 022 - 2288 2460, 022 - 2288 2470. The non-broking products / services like iLearn and Financial Learning are not exchange traded products / services and ICICI Securities Ltd. is just acting as a distributor/ referral Agent of such products / services and all disputes with respect to the distribution activity would not have access to Exchange investor redressal or Arbitration mechanism. iLearn is not an exchange traded product/service of ICICI Securities Ltd. All disputes with respect to the activity on the platform would not have access to Exchange investor redressal or Arbitration mechanism.

ICICI Securities Ltd. is a Member of National Stock Exchange of India Ltd (Member Code :07730), BSE Ltd (Member Code :103) and Member of Multi Commodity Exchange of India Ltd. (Member Code: 56250) and having SEBI registration no. INZ000183631. ICICI Securities Ltd. is a SEBI registered with SEBI as a Research Analyst vide registration no. INH000000990. Name of the Compliance officer (broking): Mr. Atul Agrawal, Contact number: 022-69997051, E-mail address: complianceofficer@icicisecurities.com Investments in securities markets are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. ICICI Securities Ltd. and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Such representations are not indicative of future results. The securities quoted are exemplary and are not recommendatory. AMFI Regn. No.: ARN-0845. PFRDA registration numbers: POP no -05092018. ICICI Securities Ltd. acts as a Composite Corporate agent having registration number -CA0113. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Please note, Mutual Fund, Corporate Fixed Deposits, Bonds, Alternate investment funds, Tax planning, Succession planning, NPS, IPO, Investment Advisory and Loans related services are not Exchange traded products and ICICI Securities Ltd. is acting as a distributor to solicit these products. Please note, Insurance related services are not Exchange traded products and ICICI Securities Ltd. is acting as a corporate agent to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The non-broking products / services like Research, etc. are not exchange traded products / services and all disputes with respect to such activities would not have access to Exchange investor redressal or Arbitration mechanism. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The contents herein mentioned are solely for informational and educational purpose.

Did you enjoy this article?

144 people liked this article. Share Feedback

Recent Articles

View all

Understanding Contango in Commodity Markets

Understand contango in commodity trading, how futures prices differ from spot prices, and how financing, storage and insurance costs influence commodity pricing.

215 views

1 minutes

19 Oct 2026

Know Your Commodity Before You Trade: Copper

Copper is a widely used base metal known for its electrical and thermal conductivity, strength, ductility and corrosion resistance. It is used across electrical wiring, construction, machinery, power infrastructure and several industrial applications.

427 views

2 minutes

09 Oct 2026

Know your commodity before you trade - Natural Gas

Natural Gas is a widely traded energy commodity used for electricity generation, industrial activity, heating and other applications. Its prices can react sharply to weather, supply and demand, inventories, global energy markets and geopolitical developments.

708 views

1 minutes

30 Sep 2026