In recent years, there has been significant growth in the number of small and medium enterprises in India. Due to the enormous opportunity for small businesses in India, a large number of individuals are coming up with innovative ideas for establishing their own business. Since establishing and running a business requires a substantial amount of capital, most entrepreneurs avail business loans to meet their fund requirements. Nowadays, business loans can be availed easily with the help of leading financial institutions. Easy repayment options, instant approval and quick disbursal of the loan amount are some of the major benefits of availing business loans with leading financial institutions. Moreover, there are various tax benefits associated with business loans. Hence, understanding the tax deductions can help business owners save a large amount of money in the long run.
Let us have a quick look at some of the most common income tax deductions for business.
Tax benefits available on a business loan
Here is how you can save tax with a business loan.
Tax benefit on the interest paid
The business loan interest rate varies from one lender to another. When you borrow funds, interest is charged, which is a fee that you need to pay to the lender for the use of their money. Hence, an interest paid on the loan can be claimed as a tax-deductible expense. Business loans available on Finserv MARKETS come with attractive interest rates. Moreover, if you have a good credit score, you can avail a higher loan amount at the reduced interest rate. While taking a loan, you can use the business loan calculator to estimate the amount of interest payable. This will help you plan your expenses better.
Before you calculate the tax liability for the year, you need to deduct the amount of interest paid from the profit. It will lead to a reduction in the net taxable profit of the business. There is no maximum limit to claim the interest amount as a tax-deductible expense.
Tax is paid on the profit generated by a business in a year. This profit is calculated after the deduction of business expenses from the gross income. If you have a high business income, the tax will be higher. Hence, in order to reduce the amount of tax, you need to deduct all expenses from the income. Check the processing fees, interest rate, and EMI before you apply for a business loan to evaluate the tax benefits.
Principal amount remains non-deductible
It is important to note that the principal amount on the loan is not tax-deductible. It is only a borrowed amount for a specific duration and not an income. Hence, when you repay the principal amount, you are only repaying the borrowed amount. Thus, this amount is not tax-deductible. You can read more about Income Tax Deductions for Business.
Consider the above-mentioned tax benefits when you apply for a business loan. Availing a business loan is a feasible option for the growth and expansion of your business. It is important to consider the requirements of the business before you narrow down on an option. There are several types of business loans offered by lenders and you need to understand how each one works for you before you select your lender.
Are you a business owner on the lookout for a business loan? Visit Finserv MARKETS and enjoy a quick loan approval. The Bajaj Finserv lending rate is quite reasonable. We offer business loans at low EMI along with other facilities such as flexible repayment tenure and minimal documentation requirements. What’s more? Once your application is approved, you will receive a loan up to INR 30 lakh in your account within 24 hours!
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