Tax Filing 2026: Can You Claim Deductions on Personal Loan Interest?

With the financial year ending on March 31, taxpayers are scrambling to maximize deductions. A common question is whether personal loan EMIs qualify for any tax benefits under the Income Tax Act.

The short answer: It depends on what you used the loan for.

Personal loan for home renovation: Interest paid qualifies for deduction under Section 24(b) up to ₹30,000 per year, provided you can document that funds were used for home improvement. This is separate from the ₹2 lakh limit on home loan interest.

Personal loan for education: If the loan was used to fund higher education for yourself, spouse, or children, the entire interest amount is deductible under Section 80E. There's no upper limit, and the deduction is available for up to 8 years.

Personal loan for business: Interest paid is deductible as a business expense under Section 37(1), reducing your taxable business income.

For general personal loans used for weddings, travel, or consumer purchases, no tax deduction is available on either principal or interest.

Pro tip for the last week of FY26: If you're planning to borrow soon, timing your loan disbursal before March 31 means interest payments in the current FY can be claimed if the purpose qualifies.

GoCredit's AI assistant can help you understand which loan products offer tax advantages based on your specific use case.