{"id":7852,"date":"2021-05-10T07:17:42","date_gmt":"2021-05-10T07:17:42","guid":{"rendered":"https:\/\/www.kredx.com\/blog\/?p=7852"},"modified":"2023-10-26T05:51:32","modified_gmt":"2023-10-26T05:51:32","slug":"tax-benefits-on-business-loan-in-india","status":"publish","type":"post","link":"https:\/\/www.kredx.com\/blog\/tax-benefits-on-business-loan-in-india\/","title":{"rendered":"Tax Benefits On Business Loan In India"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"7852\" class=\"elementor elementor-7852\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-7c3d13a1 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"7c3d13a1\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-2c50bd77\" data-id=\"2c50bd77\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-55903089 elementor-widget elementor-widget-text-editor\" data-id=\"55903089\" data-element_type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">The availability of tailor-made financing options for businesses has changed the way companies structure their investments. It has presented them with an avenue to source necessary funding without worrying about collateral or facing dragged-out processes. Moreover, the lack of usage restrictions has allowed entrepreneurs to manage any expense with ease.<\/span><\/p><p><span style=\"font-weight: 400;\">Owing to its customer-friendly benefits, the business loan segment has registered a growth of 13.8% from March to September 2020. The outstanding balance in this segment rose to Rs. 1.2 lakh crore in September compared to Rs. 1.05 lakh in March 2020, per the same report.<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><i><span style=\"font-weight: 400;\">According to the Income Tax Act of 1961, business loans are tax deductible.<\/span><\/i><\/li><\/ul><p><span style=\"font-weight: 400;\">Alongside other perks, the tax exemption-feature of\u00a0<\/span><a href=\"https:\/\/www.kredx.com\/unsecured-business-loan\/\" target=\"_blank\" rel=\"noopener\"><b>business loans<\/b><\/a><span style=\"font-weight: 400;\">\u00a0has fuelled its popularity among entrepreneurs significantly.\u00a0<\/span><\/p><p><i><span style=\"font-weight: 400;\">Read on to know more about the income tax benefits of business loans.<\/span><\/i><\/p><h2><b>Tax Benefits On Business Loans In India<\/b><\/h2><p><span style=\"font-weight: 400;\">Along with meeting a company\u2019s financial needs, a business loan also facilitates tax exemptions. Here are the heads to be aware of in that respect \u2013<\/span><\/p><h3><b>Interest Paid On Business Credit Is Deductible<\/b><\/h3><p><span style=\"font-weight: 400;\">The interest borne on a loan is exempted from tax calculation if entered into the books as an item of business expenditure. Since expenses like these are considered necessary to generate revenue, they are deducted from the total income, after which one arrives at the taxable amount. It is an excellent way for entrepreneurs to reduce their tax liability.<\/span><\/p><h3><b>The Principal Amount Is Not Tax-Deductible<\/b><\/h3><p><span style=\"font-weight: 400;\">The principal component doesn\u2019t add to or reduce a business\u2019s tax obligation. It\u2019s because you cannot deduct this sum from the gross income, unlike interest payment. On the other hand, it\u2019s also not earnings you can add to the gross income. Thus, the borrowed sum has zero impact on a business\u2019s tax liability.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Apart from these, here are a few additional pointers regarding income tax exemption on loan for business \u2013<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Any form of business loan, be it for <a href=\"https:\/\/www.kredx.com\/what-is-working-capital\/\">working capital<\/a> or equipment financing, enjoys the aforesaid provision.<\/span><\/li><\/ul><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Personal loans used for business purposes also come under this exemption.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Lastly, if the repayment is in EMIs, only the interest portion of the instalments will qualify for a deduction.<\/span><\/li><\/ul><p><span style=\"font-weight: 400;\">By being aware of the tax benefits of\u00a0a <\/span><b>business loan<\/b><span style=\"font-weight: 400;\">, entrepreneurs can save substantially on their yearly obligations. Apart from this, they can also keep in mind other aspects of this financial product to maximise their benefits.<\/span><\/p><h2><b>Benefits Of A Traditional Credit For Business<\/b><\/h2><p><span style=\"font-weight: 400;\">Here are some notable features of a business loan to be mindful of \u2013<\/span><\/p><h3><b>1.Collateral-free<\/b><\/h3><p><span style=\"font-weight: 400;\">Financial institutions typically extend business loans without collateral. Thus, enterprises just starting out or without substantial assets to their name can obtain financing easily.<\/span><\/p><h3><b>2.Funds At Attractive Rates<\/b><\/h3><p><span style=\"font-weight: 400;\">The attractive interest rates offered by NBFCs on business loans also works in favour of entrepreneurs. It reduces the total cost of borrowing and makes repayment more affordable.<\/span><\/p><h3><b>3.Multi-faceted Product<\/b><\/h3><p><span style=\"font-weight: 400;\">This financing option is specifically designed for businesses but comes with no usage restriction. Borrowers can cover an array of costs, starting from financing inventory purchase to renovating an office space.<\/span><\/p><h3><b>4.Faster Disbursal Of Funds<\/b><\/h3><p><b>Loans<\/b><span style=\"font-weight: 400;\"> for businesses involve minimal documentation and get approved and disbursed quickly. Moreover, the introduction of online applications has fast-tracked this process even further.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">A prime example of this is an app like MANDII. It presents an exciting opportunity for individuals to find suitable financiers and loan offers. Once borrowers upload their documents on the app, it will show a few options based on that information. Also, from application to disbursement, the entire process is completed on the app, improving borrowers\u2019 convenience.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">Single-window systems like these are gaining traction because they help individuals bypass the hassle of searching for a lender, negotiate with multiple representatives, or perform various formalities.<\/span><\/p><h2><b>Bottom Line<\/b><\/h2><p><span style=\"font-weight: 400;\">The advantages of a <\/span><b>business loan<\/b><span style=\"font-weight: 400;\"> make it a popular credit instrument among companies of every scale. Income tax benefits are a \u2018<\/span><i><span style=\"font-weight: 400;\">cherry on the top<\/span><\/i><span style=\"font-weight: 400;\">\u2019. Knowing the nitty-gritty of tax exemption on business loans aids entrepreneurs to thin out their cash outflow while conveniently financing various purposes across the board.\u00a0<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>The availability of tailor-made financing options for businesses has changed the way companies structure their investments. It has presented them with an avenue to source necessary funding without worrying about collateral or facing dragged-out processes. Moreover, the lack of usage restrictions has allowed entrepreneurs to manage any expense with ease. Owing to its customer-friendly benefits, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":7854,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[34],"tags":[36,55,56],"class_list":["post-7852","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-loan","tag-business-loan","tag-tax","tag-tax-benefits"],"_links":{"self":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/7852","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/comments?post=7852"}],"version-history":[{"count":7,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/7852\/revisions"}],"predecessor-version":[{"id":15029,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/7852\/revisions\/15029"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/media\/7854"}],"wp:attachment":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/media?parent=7852"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/categories?post=7852"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/tags?post=7852"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}