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TAX ON PERSONAL LOANS: 5 MYTHS VS. REALITY

Personal loans are easy financial aids, but misconceptions around their taxation often cause unnecessary worry. Let’s bust some common myths and reveal the reality behind personal loan taxes!

Here are some myths and reality about tax on personal loans:

Myth: Personal Loans Are Always Taxable

Reality: Personal loans from legitimate sources like banks or NBFCs are not taxable income, so this statement is false.

Myth: You Can Claim Personal Loan as a Tax Deduction Anytime

Reality: Deductions on personal loans are only allowed for specific purposes, not for personal spending like travel or weddings.

Myth: Gifted Loans from Friends or Family Are Not Taxed

Reality: Receiving money from friends or family without proper documentation may classify it as a gift, attracting taxes if over <span class='webrupee'>₹</span>50,000.

Myth: No Need to Show Personal Loans in ITR

Reality: You don't pay tax on personal loans, but disclose significant amounts to avoid issues, especially if tied to large purchases.

Myth: Interest Paid on Personal Loans is Always Tax-Deductible

Reality: Interest on personal loans isn't tax-deductible unless used for approved purposes like business investment, home purchase, or renovation.

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