Tax Exemptions on Popular Types of Loans
Tax is a worrisome thing for everybody out there. If you want to reduce the tax amount you’re paying every year, opt for loans which provide tax exemption benefits. The loans which come with tax benefits include Home Loans, education loans, car loans and some kinds of personal loans. These loans may not necessarily exempt you from paying tax, but will definitely reduce the amount you have to pay. The best thing: You not only save up on tax, but are also building an asset when you take a loan for buying a home, car, etc.
Did you know that Home Loans have the maximum tax benefit? The tax exemption you will get will depend on the kind of Home Loan you opt for, as well as the loan amount and tenure, and whether you are a first-time homebuyer.
There are different sections of the Income Tax Act that deal with loans. Under section 24 of the Income Tax Act, you can get a deduction on Home Loan repayment. Under section 80C, you may claim exemption on the principal part of the Home Loan. Under Section 80E, the interest paid on education loans is tax-deductible depending on the kind of loan and the time period it has been borrowed for. So, to find more about how you can reduce you tax burden, make sure you study these sections.
For more help, take a look at this infographic which rightly explains the tax exemptions on different types of loans: