Introduction
The Income-Tax Act, 2025 has introduced several provisions that borrowers — both individuals and businesses — should understand. From tax treatment of loans to deductions on interest payments, these changes could impact borrowing decisions, repayment strategies, and financial planning.
Key Highlights for Borrowers
Interest on Home Loans
Deduction under Section 80C/80EE continues for interest paid on self-occupied and rented properties.
The Act introduces enhanced deduction limits for loans sanctioned under certain government housing schemes.
Personal Loans and Consumer Credit
Interest paid on personal loans remains non-deductible for income-tax purposes.
However, loans taken for business or professional purposes may qualify for deduction under business expenses if properly documented.
Corporate Borrowers & NBFCs
Companies can claim interest deductions on loans taken for expansion, working capital, or capital expenditure.
Enhanced compliance requirements include interest reporting to the tax authority and maintaining detailed loan documentation.
Loan Forgiveness and Waivers
The Act clarifies that any loan waived or forgiven by banks or financial institutions is treated as taxable income, unless exempt under specific sections.
Borrowers must maintain proper records to avoid future disputes.
Impact on Borrowing Behavior
Tax incentives for home loans may encourage more long-term housing finance.
Businesses may prefer formal borrowing channels due to clarity on interest deductions and compliance benefits.
Compliance Tips for Borrowers
Maintain Documentation: Keep loan agreements, repayment schedules, and bank statements ready.
Understand Deduction Limits: Know how much interest can be claimed for tax deductions.
Report Loan Forgiveness Accurately: Include waived amounts in taxable income where applicable.
Consult Professionals: Engage tax advisors to optimize borrowing strategies under the new Act.
Conclusion
The Income-Tax Act 2025 aims to simplify taxation for borrowers while ensuring transparency in loan-related transactions. Understanding the tax implications of loans, interest payments, and forgiveness can help individuals and businesses make informed financial decisions and optimize their borrowing strategies.
FAQ Section
Q1. Can I claim tax deduction on home loan interest under the new Act?
Yes, deductions are allowed under specified sections, with enhanced limits for government housing schemes.
Q2. Are personal loan interests deductible?
No, personal loan interest is generally non-deductible unless used for business purposes.
Q3. What happens if my loan is waived by the bank?
Waived loans are typically treated as taxable income unless exempted under specific provisions.
Q4. How can businesses benefit from the Act?
Businesses can claim interest deductions for loans taken for working capital, expansion, or capital expenditure.
Q5. Should I consult a tax advisor?
Yes, professional guidance ensures optimal tax planning and compliance with the Act.
Published on : 18th September
Published by : SMITA
www.vizzve.com || www.vizzveservices.com
Follow us on social media: Facebook || Linkedin || Instagram
🛡 Powered by Vizzve Financial
RBI-Registered Loan Partner | 10 Lakh+ Customers | ₹600 Cr+ Disbursed
https://play.google.com/store/apps/details?id=com.vizzve_micro_seva&pcampaignid=web_share