Income Tax Benefit on Interest on personal Loan, Section 24

Section 24 – Income Tax Benefit on Interest on Personal Loan

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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 the end use of the funds matter and not its source. Under the Income Tax Act, as per Section 24 (b) 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 upto 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.

H&R Block India strives to blend tax expertise with a strong focus on continually improving the client experience to provide all its clients with an unparalleled value proposition for E filing their Income Tax Returns Online.

 Visit hrblock.in for more information or to find your nearest office to find assistance to file taxes.

Neha Joshi
Neha Joshi
Neha Joshi is a Chartered Accountant and an Assistant Manager at H&R Block. She is the Head of Content and is responsible for strategizing the entire content for website, PR and social media. She comes with a rich experience in publishing where she wrote books for various international professional qualifications. She was also a trainer for the subjects she wrote.

71 Comments

  1. s k punia says:

    i have taken home loan from s b i.but by the loan amount i cannot complete my home.so due to lack of money I HAVE TAKEN PERSONAL LOAN from central bank of india and complete this . please tell me can I take rebate on personal loan also.

    • HRBlockIndia HRBlockIndia says:

      Any loan that is taken for the purpose of buying a house is treated as loan for house. Hence you can claim the interest amount that you pay on this personal loan as a deduction u/s 24 from your income under the head ‘Income from house property’. In simple words you can claim this interest on personal loan as a deduction from your taxable income.

  2. Harish says:

    I have taken Personal loan for House Renovation Purpose, I am paying Interest of Rs. 50k per Year, Pl suggest me can i take Income tax exemption for the interest Paid.

  3. shashu32 says:

    Hello,
    I have taken personal loan to buy a land worth 10lakhs. what are the various options I have to claim tax benefits.
    I am currently also pursuing Masters. can I avail education loan to get tax benefits further?

    Thanks,

    • SUNDER PAL says:

      Sir I took a home loan from hdfc.after 2 month i took home equity loan for renovation of same property.then I took a top up loan for floor construction on same property.can I claim for income tax on all loan.if yes which section . Please reply immediately.

  4. saurabh kumar says:

    can I claim for deduction of personal loan interest or repayment of principal amount ??? if personal loan taken for marriage purpose ( other than purchase or repair of home )

  5. Sandeep Jain says:

    What evidence I need to produce in order to claim income tax in interest paid on personal loan taken for buying my house. Also this transaction has happened 2 years back….seek your guidance in getting income tax benefits. Thanks Sandeep

    • HRBlockIndia HRBlockIndia says:

      Hi Sandeep,

      Interest paid on personal loan taken to purchase house property can be claimed as a deduction. However you cannot claim principle repayments as deduction. If this interest is pre-construction period interest then you may claim this from the date you have received possession until 5 years in 5 equal installments. The construction should be completed in 3 years. However if it is post construction period interest then you may claim the interest deduction each year as you pay it.

  6. ganesh shetty says:

    Sir,

    I have took loan for marriage and borewell (which water used for agriculture purpose) purpose,Please confirm can i get exemption from Income tax.

  7. Pravin says:

    I have take loan on car it is exempted in income tax or not

  8. Pravin says:

    Car loan is exempted in income tax or not

    • HRBlockIndia HRBlockIndia says:

      Hi Pravin,

      There is no exemption for salaried individuals for car loans under the IT Act. However if you have income from business or profession you may claim these expenses as a deduction from your taxable income.

  9. vicky says:

    sir I have it return of 2 years n provisional of current yeAr n wl I got personal loan or home renuation loan..? plz reply

  10. shweta says:

    Can I get tax extemption on personal loan taken for sis marriage

  11. shubham garg says:

    I take a loan for repair my home from individual . can I get deduction of 24E ( interest paid on home loan)

  12. amrita gupta says:

    You have mentioned in your article that the principle amount repaid on the PL annually cant be claimed as deduction unless the loan was taken from a bank or other precribed lender. I have taken PL from nationalised bank and utilised the same towards purchase of home. can i claim deduction for principle amount also?

  13. DR GOKUL LAL MEENA says:

    I GOT HOME EQUITY LOAN MAX-GAIN, MAY I BENEFIT INCOME TAX ? PLEASE TELL ME ON URGENTLY.

    THANK YOU
    DR G L MEENA MOB 9414030404

  14. Vijay says:

    I have taken home loan from teacher co-op society. can I take benefit in IT form u/s 24 & 80c.

  15. Digvijay Singh says:

    Hello,
    I have taken personal loan to buy a land worth 5.5 lakhs is exempted in income tax or not.
    Thanks,

  16. Adithya says:

    Hi ,

    Am taking a mortgage loan , so how it will be benefited for my tax exemptions.

    Thanks

  17. Subrahmanyam Murari says:

    Hi,

    I have 3 practical issues, off-course it will be helpful to boost up our knowledge, these are

    1) I have taken some personal loan and it is using for the construction of a house, so is it eligible to take tax benefit U/s 80G, i have gone through the section it is showing we can take but subject to proof of evidence whenever asked by the department.

    2) I am using post paid mobile plan, where as the owner of that mobile is on my friends name. So can i get the deduction on my mobile bills which is debiting through either my debit or credit card only. But the problem is it was in the name of my friends name.

    3) this is similar to 2, i am using wifi (internet) my room this is also in the name of my friend name only, where as every month amount is deducting from my account. So can i get the eligibility to deduct actual amount paid from my account.

    So could you please look into that and let me know the answer along with proper sections to reverify it.

    Thanks & regards

    • Nikita says:

      hello,
      1) You can take credit of installment of loan purchased for CONSTRUCTION OF HOUSE UPTO RS.150000
      2) You can not take credit of Post paid bill of Mobile
      3) you also can not take credit of internet usage.

  18. meenakshi says:

    i have taken loan for house renovation purpose from private bank. pl.suggest me can i take income tax exemption for the paid interest.

  19. Raisuddin Khan says:

    I had taken personal loan to buy the property. Now while e-filing my CA is asking me to get the the proof from bank that they paid me for property purpose. Bank says its personal loan and hence they mention in the sanctioned letter ” personal loan” only. I CHECKED WITH 3 BANKS AND RECEIVED THE SAME REPLY FROM THEM THAT they can’t mention property purpose or any purpose except “personal”

    My CA is saying that bank has to give in wiriting that the loan sanctioned is for “property buying” which the bank denies as per their procedure.

    My query is that can i submitt the bank statement ( amount credited statement ) , bank sanctioned letter (personal loan) along the property agreement copy to my CA to consider my investment for tax benefit OR I HAVE TO GET THE COPY FROM BANK STATING THE LOAN THEY SANCTIONED IS FOR PROPERTY .

    • RK says:

      looking to hear from you.

    • HRBlockIndia HRBlockIndia says:

      Hi Raisuddin,
      You need to show that the amount you received as personal loan has been used by you in buying property. You can use your bank statement (showing all the relevant transactions) to prove that you spent the money for purpose stated earlier. You can contact our tax experts to receive more help on this topic. Click here to send an enquiry.

  20. Dharmendra Pandey says:

    I have taken personal loan for house renovation. I have submitted document to my employer but they have rejected and the tax has been deducted. Could you please tell me the interest paid for my personnel loan for house renovation is eligible for tax benefit . If yes, please let me know which all document needed to submit and where. Thank you!!

  21. Anand Kumar Singh says:

    Hi Sir,

    I have taken a personal loan from Bank and used that amount to build my own house . Can I get the tax exemption from IT?

  22. ROMESH KUMAR DUTTA says:

    Sir,

    My wife has taken Personal Loan for completion of renovation/reconstruction work of our self occupied house which is registered in my name. Can she claim income tax rebate u/s 80C & 24?

  23. Sanju Komar says:

    Dear Sir,
    I have changed company in Sept-2015, So I got 2 form-16 from both employers. In previous employer form-16(before Sept-2015) my HRA & LTA are not considered for exemption, Now how could I claim it.
    Also I have purchased a home 3 years before, for purchasing I haven’t incurred housing loan, I have taken 2 personal loans & arranged some amount from friends, still now I haven’t claimed tax benefit on home. Shall I claim the tax exemption on it? If yes, what is procedure? what documents required to filing?
    Please do needful for both concerns

  24. Janki Mishra says:

    Hey,
    I took personal loan to do the down payment and registration of property . Can I claim this.
    Also do you assist in tax planning and itreturns. Pelase reply.

    • HRBlockIndia HRBlockIndia says:

      Dear Janki,
      You can claim deduction if you can prove that it has been used for registration of property. Make sure that you have all the related documents safe with you. Yes, we do assist in tax planning and filing IT returns.

  25. Sanju Komar says:

    I have purchased a home 3 years before, for purchasing I haven’t incurred housing loan, I have taken 3 personal loans & arranged some amount from friends, still now I haven’t claimed tax benefit on home. Shall I claim the tax exemption on it? If yes, what is procedure? what documents required to filing?

  26. Balaji says:

    I have taken a personal loan for constructing house, Please let me know how to project it into tax exemption.

  27. Ravi says:

    I am a salaried individual and I have taken personal loan on credit card . Is it taxable in India ?

  28. k kumar says:

    hi, i am a salaried individual. i have taken a personal loan for constructing house, but that land registered on my mother name. can i claim this as incometax benefit.

  29. dinesh says:

    Hiii Sr I have taken a personal loan from sbi can I get tax rebate & pls assist me for e filling of itr

  30. Meeravali says:

    Hello,

    I have taken personal loan to buy a land worth 10lakhs. what are the various options I have to claim tax benefits?

    Thanks.

  31. Meeravali says:

    Hi,

    I have taken a personal loan for construct a house, but that land was registered on my Wife name. can i claim this as income tax benefit?

    Thanks,

  32. Rakesh Kumar Gupta says:

    Well Explained…But Plz describe what does it mean ” Note that the interest portion cannot be claimed as a tax deduction if the property purchased is at the construction stage “.

  33. Vikash Agarwal says:

    Hi HR Block,

    I have taken a loan from a private company for the purchase of a house and have repaid them with interest in the same year. Am I eligible to take the tax deduction on the interest portion.

    Please advice.

  34. Ashutosh says:

    I am in process of funding home purchase. For this i am taking home loan from nationalized bank. Additionally i am taking loan from my close relative to meet the requirement.
    I am clear on the home oan taken from bank.

    I wish to know if i can show the interest paid to my relative against loan taken for home purchase. I can show the relavant transactions receipts.
    Pl revert to resolve my query

  35. Ganesan says:

    I have taken SBI credit card loan for that I am paying principal Rs. 3645.51 and Interest Rs.4040.74 total EMI Rs. 7,686.25. For the interest portion tax levied 15% Rs. 606.11. My query whether 606.11 tax on interest portion deduction allowed in income tax as salaried individual.

  36. kartik sahoo says:

    I want to take personal loan 1 lack from SBI through by IT return.can I apply it is eligible.

  37. Faijal says:

    hi, i am a salaried employee. i have taken a personal loan for constructing house, but that land registered on my father name. can i claim this as incometax benefit. Please let know about the same matter

  38. Vijay R says:

    Hi I Have taken personnel loan and I am salaries employee in private firm getting monthly take home 30879.
    Is it possible for me show this loan for income tax exemption.

    Please advise on my email id.

    Thanks,
    Vijay R

  39. Arun says:

    Can I use the emi amount for tax deduction which am paying to the finance company for buying my bike?

  40. Mohan says:

    I have taken loan from my wife for buying a resale flat. Can I claim income tax deduction on the interest I am paying to my wife for that loan? CAn I continue to pay interest without paying back the principal to avail income tax deduction!

  41. Narasimha Sumanth says:

    What evidence I need to produce in order to claim income tax in interest paid on personal loan taken for buying PLOT/ SITE. Also this transaction has happening from last 2 years ….seek your guidance in getting income tax benefits. Thanks Sumanth

  42. Shyam Sundar says:

    Hi,

    I have taken personal loan for house renovation, as I read the blog I understood that the interest paid can be shown under Section 24(b). Now the house that was renovated is under my father’s name, Can I show the interest paid under Section 24(b)?

    Thanks,
    Shyam

  43. VIJAY PATIL says:

    I have taken personal loan from SBI for purchasing of home/plot to construction of home. I am a central govt employee (Para military (Border Security Force)) and want get income tax benefit. Which documents I have to produce?

    Is a personal loan can give rebate, if purchase farm or agricultural property?

  44. narendra bisht says:

    if we have taken loan from bank
    1 ,this is income or not
    1, if this is income so should i have to pay income tax on personal loan which is taken from bank
    and i want to know about income tax what i should do for learning income tax slab which book is important for preparing income tax

  45. Ravi kumar says:

    I have taken personal loan for house renovation. I have submitted document to my employer but they have rejected and the tax has been deducted. Could you please tell me the interest paid for my personnel loan for house renovation is eligible for tax benefit . If yes, please let me know which all document needed to submit and where. ! kindly reply

  46. Yogesh says:

    I paid EMI of my fathers agri loan, Am I eligible to claim for tax benefits ?

  47. Rakesh V Devare says:

    Dear Sir/ Madam

    I have taken personal loan form HDB bank, can i saw claim in incom tax for dedcution ?

  48. Sachin Jindal says:

    In case of a partnership firm, if the partner has advanced some amount of money as loan, under which head of income will such interest be disclosed in the partner’s return? Income from profits or gains from business or profession or Income from other sources?

  49. Raj says:

    As a lender I received the interest amount from the borrower against a personal loan, how to declare that interest income while filing ITR. Please confirm the tax category to be selected for this.

  50. Sapna goyal says:

    Hello
    I am a salaried person and I take a car loan can I show this in other sources of income head as my expenses in the F. Y 2016-17

  51. mantu says:

    I have taken personal loan from citi bank in 2013 to purchase agricultural land . Still I am paying emi . Is it applicable for tax saving ?

  52. Sandeep Khemot says:

    Hello,

    I am taking personal loan for purchasing home but I property will be registered on my wife name. Can I claim for rebate on interest paid on personal loan?

    Regards,
    Sandeep Khemot

  53. Sajid says:

    I am a salaried employee and I have taken personal loan on credit card . Is it taxable.

  54. Amit says:

    Hi,

    I am a salaried employee, I have 2 queries –
    1. I have taken personal loan to take a home on lease for 3 years, can I claim the loan amount for Tax benefit and can file ITR?
    2. I have taken personal loan to pay my credit card bills, can I claim the loan amount for Tax benefit and can file ITR?

    If so what all document need to be submitted while doing ITR?

    Thanks in Advance!
    Amit

  55. Srinivasulu says:

    I took personal loan and used money for construction at my native place for my parents. can i claim tax deduction. what are all documents are required for proof

  56. Mukesh Chauhan says:

    Hi,

    I am a Salaried Employee. I had taken Person loan since 2016 for next 4 years.

    I have plan for purchase house in 2018, so can I get Tax Benefit on interest yet this year ?

    Thanks,
    Mukesh

  57. Gagandeep Malhotra says:

    I Took Home loan on my name to buy a property but the amount was not sufficient to pay for the down payment & Registration fees. So, I took personal loan on my wife’s name. Can I get tax benefit on the interest part of the personal loan. We have the registration fees receipt for the proof to take exemption.

    Thanks

    Gagandeep

    • HRBlockIndia HRBlockIndia says:

      Interest paid annually on personal loan can be claimed for deduction if the property is to be acquired. However, if the property purchased is at the construction stage, tax deduction will not be allowed on the interest paid.

  58. madhab says:

    Hi i have taken personal loan and use the amount on Share market and make loss.
    Can i get a deduction on interest paid amount

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