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WHICH TAX BENEFITS ARE AVAILABLE ON BUSINESS LOAN?



Have you ever thought about the impact on taxes while applying for a business loan and feel hesitate to avail the one? To your surprise, loans against business are tax deductible. According to the Income Tax Act, getting funds through loan is not similar to earn money for a business. Therefore, the interest charged on business loan is considered to be tax deductible but remember the principal loan amount is not tax deductible.

When you "Apply For Business Loan" it helps your business to be alive and operational. Business loan act as a financial tool that intends to fulfill all your business requirements from working capital needs to recruiting labor and upgrading the machinery to expanding your business. Undoubtedly, loan against business plays a key role in growth of your business. Nowadays, these loans offer number of benefits to the business owners.

The major benefit of business loan that it can be used to serve all your business needs and come with flexible repayment structure which makes the loan reimbursement easier for the businessmen. There are multiple loan schemes purposed by government to support the small scale business with convenient terms and conditions, so that it would be pocket friendly option for small business owners. At the last but not least, interest rates on business loan is tax deductible which lessen the borrower’s tax burden.

Tax benefits on business loan

The rate of interest on business loan differs from lender to lender which is categorized as an expense because the loan money is being used for fulfilling business needs. Therefore, the interest rate paid on the business loan is claimed to be tax deductible. When you evaluate tax for your business, the interest component is deducted from your gross earnings. So, try to maintain correct records of your loan repayments to submit as proof to the income tax department.

However, interest component is tax deductible but the business loan amount is not either you "Apply For Business Loan Online" or offline. So, a business person is not allowed to deduct this money from their income while calculating taxes because it is not earned from your business. It is the money that you have borrowed from someone else and it needs to be repaid. Hence, the principal amount cannot be added to your net worth and one can neither levy nor deduct any kind of tax on it.

Getting a business loan has become more convenient and easy these days which has been possible with the help of digitalization in the lending market. This loan option is widely available now and can help your business to run smoothly and to grow at the next level to reach the newer heights of success.

However, tax benefits on interest rate sounds interesting and luring but the important thing to remember is that it’s a loan and it needs to be repaid because defaulting on loan can be risky and adversely impacts your credit score and you will not be able to avail any kind of loan in the future.


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