Partner With Us NRI

What Are The Tax Benefits On Personal Loans?


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.


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 Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470.  Please note, loans related services are not Exchange traded products and I-Sec is acting as a distributor 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 contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein mentioned are solely for informational and educational purpose. Investments in securities market are subject to market risks, read all the related documents carefully before investing.

Most Popular

  • 18 Jan 2022
  • ICICI Securities

Upcoming Union Budget 2022: F&O Trading and Risk Management Strategies you Should Note to Manage Risks Better

The Union Budget of India, also referred to as the Annual Financial Statement in Article 112 of the Constitution of India, is the annual budget of the Republic of India. The Government presents it on the first day of February so that it could be materialized before the beginning of new financial year in April.

  • 17 Jan 2022
  • ICICI Securities

TCS announces Rs 18,000 crore share buyback: How can Investors benefit from the opportunity?

Tata Consultancy Services Limited board on 12th Jan, 2022 approved a proposal to buy back upto 4,00,00,000 Stocks for an amount not exceeding Rs 18,000 crore at Rs. 4,500 per share. 

  • 12 Jan 2022
  • ICICI Securities

What is a Bond Ladder? & How to Use it to gain from Debt Funds?

Investing in bonds that mature on different dates makes a bond ladder. Read on to know how to make gains from debt funds using a bond ladder.

  • 12 Jan 2022
  • ICICI Securities

The shoe must go on! An overview of the Indian footwear industry

The Indian footwear market has seen many changes in customer behaviour towards footwear.

  • 12 Jan 2022
  • ICICI Securities

Is a 50:50 investment in Large-Cap & Mid-Cap Funds a good idea?

Large-Cap vs Mid-Cap asset allocation can be tricky, especially when the market is experiencing some headwinds. Developments and economic cues can either push the market indices higher or push them off a cliff.

  • 11 Jan 2022
  • ICICI Securities

Demerger in Motherson Sumi Systems Limited: Implications on your F&O positions

Motherson Sumi Systems Limited has fixed a Record Date of January 17, 2022 for the purpose of issuance and allotment of 1 equity share of Motherson Sumi Wiring India Limited for every 1 equity shares to shareholders of Motherson Sumi Systems Limited.

  • 11 Jan 2022
  • ICICI Securities

NSE to launch Futures and Options for Nifty Midcap Select Index from 24th January

F&O Trading has evolved in India with F&O volumes now contributing to more than 95% of overall NSE volumes. F&O volumes in NSE have nearly doubled in FY 22 compared to FY 21 same time.

  • 09 Jan 2022
  • ICICI Securities

Demerger in GMR Infrastructure : Implications on your F&O positions

GMR Infrastructure Limited has fixed a Record Date of January 12, 2022 for the purpose of issuance and allotment of 1 equity share of GMR Power and Urban Infra Limited for every 10 equity shares to shareholders of GMR Infrastructure Limited.

  • 06 Jan 2022
  • ICICI Securities

Best Stocks to Buy in 2022

The new year is here, which means it's time for new investments! If you're wondering which are the best stocks to buy in 2022 that will give you returns in the range of 20%-80%, we've got a list of 10 top stocks in different sectors that you should definitely consider for your portfolio.

  • 04 Jan 2022
  • ICICI Securities

What is smallcase? Know Investing Ideas via smallcases

In our efforts to offer you the most seamless investing experience, we’ve partnered with smallcase. What exactly are smallcases? They are baskets of stocks or ETFs based on relatable ideas. They are professionally managed by registered entities or individuals.