In the realm of business operations, procuring a loan can be a prudent decision for financing growth and sustaining operations. A business loan can provide the requisite capital to expand, purchase inventory or equipment or pay salaries. Additionally, it can reduce a business's overall tax liability.
In India, businesses can be applicable for several tax benefits by procuring loans for their operations. Business owners need to be aware of the intricacies of tax laws and regulations surrounding business loans to take advantage of the maximum possible tax benefits.
Apply now with Shriram Finance for a business loan to infuse funds into your business and be eligible for tax benefits.
Key Highlights
- Businesses in India can benefit from tax deductions on the interest paid on business loans taken out for specific purposes.
- It is important to keep accurate records, properly document loans and consult with professionals to take full advantage of these tax benefits on business loans.
- The applicant for the loan must not be older than 70 years of age at the time of maturity of the loan.
- With careful planning and management, businesses can leverage business loans to fuel their growth while minimising their tax liabilities.
Here is what we need to know about business loans tax benefits in India.
Tax Benefits On Business Loans
Let us go through the tax benefits business owners can claim on their business loans.
Interest Paid on Business Loans is Deductible
One of the primary tax benefits of obtaining a business loan is that the interest paid on the loan is tax deductible. This implies that businesses can reduce their taxable income by the sum of interest paid on the loan.
Nevertheless, it is crucial to note that the interest paid on personal loans, including loans taken out by the business owner, is not eligible for tax deductions.
Therefore, businesses must exercise prudence while determining the loan structure, as well as the nature of the loan, to ensure that the tax benefits are maximised while minimising any associated risks or penalties.
Loans for Specific Purposes Are Eligible for Tax Deduction
One more way businesses can obtain tax benefits on their loans is by applying for specific purposes. Loans procured for designated business purposes, such as acquiring equipment, constructing or buying a property or augmenting working capital, qualify for tax deductions.
Processing Fees on Business Loans are Tax Deductible
Business owners can claim tax deductions on the processing fees for the business loans that they have obtained.
Processing fees for business loans refer to the charges that a lending institution or bank levies for processing a loan application. These fees are usually a percentage of the loan amount or a fixed amount and are non-refundable. The processing fees are charged by banks and lending institutions to cover their administrative and processing costs, such as credit checks, legal documentation and other expenses incurred in the loan application process.
Shriram Finance offers business loans that are subject to processing fees of 2%* and foreclosure charges of 3%* to 6%*.
Features of Shriram Finance Business Loans
Let us now take a look at the features and benefits of the business loans offered by Shriram Finance.
Competitive Interest Rates
The business loans offered by Shriram Finance come with attractive interest rates starting at 15%* p.a.
Flexible Repayments
The business loans offered by Shriram Finance have a flexible tenure, which is in the range of 12 months to 60 months, depending on the loan amount.
Quick Loan Approvals and Disbursals with Minimal Documentation
Business owners can rest assured of fast approvals and disbursals of loans, with the process being hassle-free and requiring minimal documentation.
Regular EMI Reminders
Shriram Finance will regularly send alerts to the registered mobile number and email ID about any upcoming EMI payments so that business owners do not miss out on any timelines.
The website of Shriram Finance also provides an EMI calculator tool that facilitates the calculation of EMI payments and the total amount payable for your business loan. Borrowers must enter the loan amount, interest rate, and loan tenure into the calculator. The tool then generates the EMI payments due during the loan period, making it a convenient and efficient tool.
Summing Up
Obtaining a business loan can prove to be a potent instrument for financing business operations and facilitating growth. In India, businesses can avail of several tax benefits under business loans.
Keeping accurate records, obtaining loans for specific business purposes and comprehending the nuances of tax laws and regulations can help businesses reduce their overall tax liability and enhance their financial performance.
If a business owner is considering applying for a business loan, it is highly recommended to obtain a complete picture of the requirements of one's business to ensure that the most favourable decisions are made to maximise the tax benefits under business loan.
A judicious approach to tax planning can prove to be very useful in identifying the most suitable loan options and optimising tax deductions, resulting in better financial outcomes for the business in the long run.
FAQs
1. How do business loans help with taxes?
Business loans can help with taxes by providing opportunities for tax deductions. Interest paid on business loans is generally tax-deductible, which reduces the taxable income of the business. This, in turn, lowers the overall tax liability for the business.
2. Is there any tax benefit to a business loan?
Yes, there are tax benefits associated with business loans. The interest paid on business loans is eligible for a tax deduction under the Income Tax Act of 1961. This deduction can be claimed as a business expense, reducing taxable income and thereby lowering tax liability.
3. Which loans are eligible for tax exemption?
Particular loans are eligible for tax exemption or deduction in India. The following loans are generally eligible for tax benefits:
- Home Loan
- Education Loan
- Business Loan
