Personal loan

Hey,

Here are some general points to consider:

Purpose of the Loan: Personal loans are usually meant for personal expenses such as education, medical bills, vacations, or debt consolidation. Using a personal loan for a commercial property may not be tax-efficient.

Tax Deductions: In many countries, interest paid on loans for commercial properties is tax-deductible as a business expense. However, interest paid on personal loans typically does not qualify for the same tax deductions.

Collateral and Loan Terms: Lenders may be more willing to offer loans for commercial property purchases if the loan is secured by the property itself. Personal loans are typically unsecured, so you might face higher interest rates and shorter repayment terms.

Legal and Financial Implications: Attempting to use a personal loan for a commercial property purchase when it's not intended for such purposes may have legal and financial consequences. Lenders may require you to disclose the purpose of the loan, and misrepresenting it could be considered fraud.

In summary, using a personal loan to buy a commercial property and claiming tax benefits for the interest paid can be a complex and potentially risky financial strategy. And no tax benefit is allowed.

Hope this answer is useful to you . Please give feedback if you find this answer useful .

Vaibhav RK

CA, Delhi

35 Answers

Talk to Vaibhav RK

It may be subject to litigation

Vivek Kumar Arora

CA, Delhi

4950 Answers

1105 Consultations

Talk to Vivek Kumar Arora

For detailed discussion you may opt for phone consultation

Vivek Kumar Arora

CA, Delhi

4950 Answers

1105 Consultations

Talk to Vivek Kumar Arora

Hi,

Please note that the tax benefit for interest paid on a personal loan used for purchasing a commercial property is a controversial issue and a subject matter of litigation and hence not advisable.

As per the second alternative:

If you’re buying or constructing a building for commercial purposes, you can avail the commercial shop loan and the interest you pay on your loan will be deductible under Section 24b of the Income Tax Act 1961.

This can be claimed from the year during which you take possession after the construction is complete.

You may also claim five equal installments for any interest paid over a given year before taking possession of the commercial property.

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Thank you.

Chhaya Rajput

CA, Noida

32 Answers

2 Consultations

Talk to Chhaya Rajput

Personal Loan: Using a personal loan to buy a commercial property and then claiming a tax benefit for the interest paid is not advisable. This approach is controversial, subject to litigation, and may not be considered a valid means of claiming tax benefits for interest on a commercial property.

Commercial Shop Loan: If you are purchasing or constructing a building for commercial purposes, you can avail a commercial shop loan. The interest paid on this loan is deductible under Section 24b of the Income Tax Act 1961. You can claim this deduction from the year in which you take possession of the property after construction is complete.

Additionally, you may claim five equal installments for any interest paid over a given year before taking possession of the commercial property. This allows you to spread out the tax benefit over several years.

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

Thank you.

Shubham Goyal