Take Huge Tax Benefit On Personal Loan FY 2019-20

Personal loan fy 2019-20

Income tax benefit on Personal loan fy 2019-20

According to Income tax act,you can take huge tax benefit on personal loan for fy 2019-20.

The condition is that the personal loan you have taken,must be used for the following purposes:

  • For the purpose of construction of a residential building,house.
  • For business
  • For purchase of any other asset.

Personal loan for purchase or construction of residential property

if you take a personal loan to purchase or construct a house, you are eligible for a tax deduction against the interest  of your loan repayment.

• In case of self-occupied house, you can claim up to Rs. 2,00,000 interest amount as tax-deduction.

• If  property is on rent, you can claim the entire amount of interest paid on a home loan  as a deduction.

If Loan amount invested in business:

If  personal loan amount is used for investment in a business,

the interest paid on the loan is considered as an expense, and therefore it would get deducted from the gross profit.

It will ultimately reduce your tax liability.

If Personal Loan amount used for buying the asset:

If you have used the personal loan to buy assets like non-residential property, jewelry, shares, etc.,

Then you can add this  interest sum to the cost the purchased asset.

And you can only take this deduction when you sale this asset.

Thus at the time of sale of such asset,you can deduct this loan interest from your capital gains.


Suppose Anuraag has taken a loan of rs. 5 lakhs.

And she has used this loan for construct her residential house.

Now as this house is self-occupied.

So in this case she will get up to 2 lakhs of interest deduction under section 24(b), for a particular FY year (say 2019-20).

Steps to calculate her deductions

Suppose Anuraag’s gross salary for fy 2019-20 is 10 lakhs.

And she has taken personal loan of rs. 8 lakhs for 5 years.

And she has used it in construction of her house.

Suppose her interest amount for fy 2019-20 is  2 lakhs.

Hence her income from house property is rs. -2,00,000.

So 10,00,000-2,00,000= 8,00,000.

Now deduct rs. 50,000 as standard deduction.

Also deduct rs. 150,000 as savings under section 80C.

You can also deduct principal amount of home loan under 80C section.

Hence her taxable income becomes:

8,00,000-50,000-150,000= 6,00,000

Finally 0-2,50,000=no tax.

So her total tax will be as under


Also health education cess of 4% of 32500 is 13,00

So her total tax liability will be rs. 33,800.


At last it is clear from the above discussion that  you can take tax benefit on personal loan,if you have used this amount to construct or renovate your residential property.

Also read:

Income tax slab rates for fy 2019-20

Income tax slab rates for senior citizens fy 2019-20

Kuldeep Singh

is a professional blogger,teacher and income tax expert

Click Here to Leave a Comment Below 2 comments
Vikas Dubey - November 10, 2019

Sir, if I purchased plot for home construction then can i used personal or OVERDRAFT loan amount interest as rebate in section 24For home loan.

    Kuldeep Singh - November 11, 2019

    Personal loan can be taken as deduction for interest part of your loan emi, if it is used for home construction.


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