02 June, 2025 | 16:13 IST
A personal loan is a type of unsecured loan that individuals can take for various purposes, like medical expenses, home repairs, or weddings. It doesn’t require any collateral, such as property or a car, making it easier for people to access. Personal loans generally come with fixed interest rates and flexible repayment terms. The interest rates start at around 10-12% per annum, while the loan tenure ranges from 3 to 60 months. Certain lenders may extend this period up to 7 years or longer.
While personal loans offer quick approval and flexibility of choosing the amount, or repayment schedule as per the borrower’s convenience, the interest rates are generally higher than those of secured loans. Unlike secured loans like home loans, the borrowers can’t claim tax benefits on the interest and principal paid.
However, there are certain conditions under which you can still claim income tax deductions on your personal loan interest payments. It’s important to consider all the details about the key aspects related to personal loan interest rates, which could be helpful in saving a little more money on your overall loan repayment outgo.
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No, the amount you receive from a personal loan is not taxable. A personal loan is considered a debt, not income, so it is not subject to income tax. You are required to repay the loan amount along with the interest over time, but the principal loan amount itself is not taxed.
If you are planning to avail a personal loan for various purposes, it could be a suitable option to explore offers on Moneycontrol app, which provides loans up to Rs 15 lakhs through eight leading lenders. You can also choose the repayment schedule as per your convenience. The best part is the interest rates start at 12% per annum and it’s a completely digital process enabling instant reimbursement.
The interest paid on a personal loan can be eligible for income tax deductions under specific cases, depending on how the loan is used. For example, you can claim tax deductions for the interest paid on the personal loan availed for home renovation, purchasing a new house or investment in business under various sections of the Income Tax Act, 1961. However, the loan amount or the principal is not treated as taxable income.
Personal loans generally do not offer tax benefits, but there are specific situations where you may be able to claim tax deductions or exemptions. The eligibility for these benefits depends on the purpose for which the loan is used.
Let’s take a look at under what conditions you can claim deductions related to a personal loan repayment:
To sum up, tax benefits on personal loans are available under various sections of the Income Tax Act, 1961. However, you have to understand the circumstances under which tax deductions on the use of the loan amount are allowed. It’s advisable to consult a financial planner or to set aside the exact amount from a personal loan for the specific purpose to avoid confusions while filing the Income Tax Return (ITR).
Also ensure to produce adequate proof to show that you have used the loan amount for the specified purpose to claim the benefits as per the I-T Act.
You can check multiple personal loan offers through the Moneycontrol app and website. The interest rates start at as low as 12% per annum. Moneycontrol provides instant personal loans up to Rs 15 Lakhs in partnership with eight lenders in a completely paperless process.
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