Tax
exemptions are very common with loans in India. This is very crucial as the tax
benefit many times are the difference between actually being able to purchase a
product and not being able to buy a product. You should be aware of what type
of tax exemptions is available for different types of loans. They include the
following:
- Home loans
These
are perhaps the biggest loans which a person
takes in terms of an amount of money given. Therefore, tax exemptions are given
to both the principal as well as the interest earned. For the principal, up to
1.5 lakh rupees can be deducted whereas for interest earned on the loan, up to
2 lakhs in rupees can be deducted if the construction was completed at least 3
years before the financial year the loan was issued on. However, it must be
noted that if the property which the loan is given for has its ownership
transferred before its completion, the tax benefits availed to the person who
took the loan will be not be considered and he/she will have to pay the full
amount of the tax benefits availed.
- Education loans
Before
education loans were unthinkable but now with everyone going to colleges
abroad, loans of this sort have significantly increased. There is no upper
limit for the money which will be deducted on this kind of loan. However, it
can only be used for someone who is pursuing higher education. The loan is only
subjected to tax exemptions either if the full loan period is complete or if 8
years have passed since you have taken the loan.
- Car loans
Car
loans are generally cheaper than both education and home loans. This is one of
the reasons that individuals who have a salary are not allowed to take car loans
in India. The only people who are allowed to take car loans are either
businessmen or self-employed. There have been many complaints against this and
it may be changed.
- Personal loans
Personal
loans are perhaps the smallest loan in terms of an amount of money that is in
question. However, these are only available for a declared business or for
interest on loan repayments used for projects such as construction.
However, taking a loan is a very complex matter
so it is crucial that you do not take the loan without thinking it through or
consulting someone.