How to obtain tax savings through Business Loan in Indian

Tax Saving on business loans in India;Tax Benefits; Tax Benefits

Whether you’re thinking about taking benefit of a small business loan, but you’re hesitating to go for it and you’re not sure how it will affect your taxes for next year.

Actually, the answer is  – Interest on Corporate loans is  Tax-deductible expenses!

Business loans don’t dramatically alter what the other one owes in taxes. Pursuant to the 1961 Income Tax Act, having money through loans is like not earning money for the company. The interest paid on a commercial loan is also called tax-deductible, while the principal sum is not tax-deductible. Yet, then you have to obey certain laws.

How To Take Advantages of  Business Loan?;Business Loan; Business Loan

Financing for the company serves as a fuel that helps them to be alive and functional. Business loans are those investment funds designed to meet a business’s funding needs. From meeting the requirements for working capital to buying inventory and from paying the staff to paying rent for the workspace or factory space a business loan has the potential to help you with all these. So, it’s not likely to be incorrect if we suggest a business loan plays a vital role in the growth of the company. Taking up a business loan India offers the borrowers several benefits

  • You can use a business loan to serve multiple business purposes.
  • Business loans are easily accessible and come with flexible repayment terms which make borrowers’ loan repayment more convenient.
  • The government has launched several loan schemes to support small and medium-sized enterprises that have very flexible terms and conditions and off course pocket-friendly borrowing costs.
  • Interest paid on business loans is tax-deductible because it is considered an expense for companies. The reduction of interest rates lightens the tax burden on the borrower.

Tax benefits under the Business Loan which can be used?;Tax Benefits on Business Loan; Tax Benefits on Business LoanThe interest rate on business loans varies from lender to lender, where it is classified as a cost owing to the use of loan funding to fulfill business purposes.

Hence the element of interest paid in the loan repayment is claimed as a tax-deductible cost.

The interest payable is deducted from the gross income when calculating income tax on your company. Make sure you keep correct records of your business loan so that you can have proof if the income tax department requests for it.

In the case of company debt principal which is not tax-deductible;Tax Deductible;Tax-Deductible


The principal balance on a corporate loan is not tax-deductible. And you are not permitted to subtract the number from your gross business income when calculating taxes.

The fact of the matter, however, is that your company is not really getting the principal amount. The cash is borrowed by a third party and is due to be repaid. And it can’t be counted as your revenue from the company.

What does it mean you can not include the balance of the business loan in your gross revenue? And you don’t have to pay income tax on this sum nor should you deduct it from your taxable profits.

In today’s world, getting a business loan has become fairly straightforward; this has become possible with the introduction of advanced banking technology. The loan is readily available and will help you grow your business and hit new heights. However, the crucial part that can not be discounted with any of these advantages is that it’s a loan that has to be repaid over time.

How to reduce or eliminate Debt?

Nowadays, the idea of borrowing has become much more popular. Several people, especially young people, are now borrowing more than even to meet their daily and luxury needs. Higher borrowings have, however, driven many people into a debt trap, which can lead to a lot of financial worries.

While it is popular in today’s age to borrow money to make ends meet, the underlying risks acquired by individuals due to high borrowings are very high. Whether it’s an EMI or a personal loan, young people think that each month they will be able to pay off the dues and keep borrowing more. It comes, however, at a major cost or with rising interest.

Here are some ways that you can reduce or eliminate Debt

  • No more debt creation

This alone won’t get you out of debt, but at least it’s not going to make your debt worse. You won’t make any progress if you continue adding debt while you pay it off, if you make any progress at all. By cutting your credit cards or even freezing your credit, reduce your temptation to build more debt.

  • Consolidate the Debt

Another smart way of making your debt more manageable if you want to escape bankruptcy is to merge your debts. Particularly if you don’t have enough money to cover all the monthly payments, having to make various payments for several debts all at once can be overwhelming.

  • Cut off your cost

Since working out your overall debt, the second thing you can do is cut back on expenses. It’s close to how firms when in heavy debt, cut their operating costs. If your debt ratio has become extreme, you can cut back on most luxuries other than keeping all your credit cards away, such as entertainment and media subscriptions. You have to resist the temptation and move on even when tempted to swipe your credit card. Try to accumulate portions of your monthly income and bonuses to pay them off because you have a long line of pending loans.

  • Restructuring existing loans and reorganizing them.

Almost all banks have a facility for debt management and advice that assists distressed borrowers. External agencies specializing in restructuring debt are also present. To see what is due, and how it can be reworked, seek professional assistance. To start with, repayment schedules worked out after restructuring can be serious, but they provide the best scope for repayment. Credit card fees can be converted into personal loans; waiver penalties can be negotiated; repayment periods can be tailored according to the borrower’s capacity.

  • utilization of existing   assets

If you have enough properties that you can mortgage or offer in order to pay debts, then using them will be ideal. The last one is the most preferred choice, you can still get cash for mortgaging your home, savings, provident fund balance and even gold. It should be remembered that asset loans come at a lower interest rate and make the job much simpler for borrowers. If you can sell off existing unused properties to repay your donations, it is even better.

  • Seek professional consultation

Another choice you have is to seek support from both family members and financial experts if you are high in debt. It should be noted that many banks have dedicated debt management and advisory facility that has been set up to support high-exposure borrowers. An external expert or agency may also be approached for consultation. It is one of the most realistic strategies and, even though it takes some time, it will get you to the finish line.

Also, read the links below for more updates:

How to Reduce Loan Burden?

Section 54F, read with section 263, of the Income-tax Act, 1961


Everything You need to know about SIDBI Loan Scheme

Impact of GST on Personal Loan

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: or call at 09811322785/4 9555 5555 480)