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Business Loan & Taxes: Top 5 Points to Know

By Finserv MARKETS - Sep 3,2019
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Top 5 Points to Know about Business Loans & Taxes

Establishing a business requires a huge investment. Therefore, entrepreneurs look for various financing options to fund their business idea. Choosing a business loan with low interest rate and other additional features can be extremely helpful in managing the initial expenses of the startup. However, entrepreneurs should go through the terms and conditions of the business loan carefully before applying for it. In addition to that, they should also review the financial institutions they opt for.

Since opting for a business loan can also give you tax benefits, it remains as one of the best financing options available to the entrepreneurs. Below is a guide to how entrepreneurs can avail tax benefits on business loan.

Knowing Tax-Deductible Expenses

Tax-deductible expenses are the ordinary expenses that are helpful for the businesses in order to generate income. This, in turn, brings down the gross revenue and lowers the taxable income. It is advisable to know the interest rates, processing fees, and different terms and conditions before taking up a business loan.

Business Loan Interest Tax Deduction on the Business Loan

  • The business loan interest is the extra sum that the borrowers need to pay for getting the fund. It is a charge paid to the financial institutions for permitting the use of the fund.
  • The interest on business finance is tax-deductible. The tax authorities allow the tax benefits to the companies that avail the business finance. This helps the borrowers to reduce the total tax to be paid for the company as well.
  • It is important to note that the principal repayment amount is not tax-deductible.
  • As the principal repayment is just paying back the borrowed cash, it is not tax-deductible.
  • Lastly, borrowers should ensure that the loan is repaid within the specified tenure. Failure to repay the loan amount on time may lead to serious concerns for the borrower in the future.

Now that you are well aware of the various business loan tax benefits, ensure to make the most of it while repaying your business loan.

The business loan amount approved by the financial institution depends on the collateral you provide. Moreover, you can also use the Credit Guarantee Scheme by the Government to avail a higher loan amount. The loan amount also depends on the Model of your business and on the current financial status of your business.

If you have a good credit score, you can avail a higher loan amount at a comparatively lower rate of interest. Therefore, it is recommended to boost your credit score before applying for a business loan.

With Non-Banking Financial Companies (NBFCs), you can avail business loans in a hassle-free manner. A Bajaj Finserv Business Loan can be availed through an online application process. Moreover, you can customize your business loan to suit your needs in the best possible way. Most competitive business loan interest rates and flexible repayment options are some of the added advantages of availing a Bajaj Finserv Business Loan.

The business loan can be easily repaid through EMIs. With the help of an online business loan EMI calculator, you can get an estimate of your monthly installments. This can help you plan your monthly budget wisely.

You can also get to know about the benefits of business loan.

Know About Tax Benefits on Business Loan in India

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Bajaj Finserv Direct Limited ("BFDL") is primarily engaged in distribution of financial products and services through its digital platform (“Bajaj Finserv MARKETS”) and inter alia renders services of customer acquisition, providing preliminary credit support activities, fulfilment services and post-acquisition customer services to Banks, NBFCs, HFCs. BFDL is also a registered Corporate Agent (Composite) under valid IRDAI registration number: CA0551 valid till 10-Apr-2024 for solicitation and servicing of Insurance Products. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522