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Tata Capital > Blog > Loan for Business > Tax Benefits on Business Loan

Loan for Business

Tax Benefits on Business Loan

Tax Benefits on Business Loan

Whether you are planning to convert your vision into reality and start your own business or looking for efficient ways to grow expand your established business, business loans can provide you with the necessary funds to give your business the extra push it needs. And while several business owners may be wary of applying for a business loan due to additional expenses such as taxes, the matter of the fact is that business loans are tax-deductible and do not alter your tax payments.

Wondering how a business loan can help you exempt the dreaded tax payments? Read on to find out how.

Tax Exemption on Business Loans

Thanks to the 1961 Income Tax Act, receiving capital through loans is not considered the same as earning business revenue. As a result, any interest levied on a business loan is tax-deductible as they are considered to be a business expense and not revenue. Since it is utilized by businesses to set up or expand their business, applying for a business loan in India can ease the borrower’s tax burden and focus on business growth and expansion.

Taking Advantage of Varying Interest Rates

Owing to the growing competition amongst financial institutions, a loan for business in India has reasonable and affordable interest rates. This allows loan seekers to take out a loan without worrying about large repayments. One important thing to remember is that the principal loan amount is not tax-deductible as it is issued as a borrowed amount for a certain period and not as an income. But since the rate of interest in the market is highly competitive, the taxable income is considerably reduced.

Using EMI to Gain Tax Benefits

Since tax is charged on the net profit earned by a business in a financial year, greater the net income, higher would be the taxation. But an easy solution to lower the payable tax is to deduct all expenses cautiously from the gross income itself. EMI is one such expense which can be deducted from the gross income and aid in significantly lowering the total tax amount. Hence, calculating interest rates, processing fees and other obligatory fees applicable on a business can help you evaluate your tax benefits.

Additional Benefits of Business Loans

Despite getting acquainted with the many tax benefits that apply when taking a business loan, some people may still be wary about applying for a loan for business. So, let’s take a look at some of the other ways that a business loan can act as a saviour for your company apart from being tax-deductible.

  1. Financial institutions understand that businesses in growth mode require constant funding for successful expansion. And so, to avoid putting a halt on your company’s growth, they disburse loans quickly.
  2. A business loan requires minimal documentation and business loan eligibility. In fact, some financial companies do not even ask for any collateral from the applicants.
  3. In today’s date, lending institutions offer a loan for business which can be completely customised to cater to the exact needs, demands and specifications of the applicant.

Tata Capital offers a wide range of tailor-made loan for business to help you expand business. With our flexible EMI plans, attractive interest rates, easy repayment options and zero collateral requirements, you can scale new heights in your business.

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