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What is the impact of debt on my taxes?

Curious about Paying off debt

What is the impact of debt on my taxes?

In India, the impact of debt on taxes depends on the type of debt you have and the purpose for which you took the debt. Here are some ways in which debt can impact your taxes:

1. Home loan interest deduction: If you have taken a home loan to buy a house or construct a house, you can claim a deduction of up to Rs. 2 lakh on the interest paid on the loan under Section 24(b) of the Income Tax Act.

2. Education loan interest deduction: If you have taken an education loan to fund your higher education or your children's education, you can claim a deduction for the interest paid on the loan under Section 80E of the Income Tax Act.

3. Business loan interest deduction: If you have taken a loan for business purposes, the interest paid on the loan can be claimed as a business expense and can be deducted from your taxable income.

4. Personal loan interest deduction: Unlike home loan, education loan or business loan, interest paid on personal loan is not tax deductible in India.

5. Debt forgiveness: If your debt is forgiven or cancelled, the amount forgiven or cancelled is considered as income and is taxable under the Income Tax Act.

It is important to note that the tax implications of debt can vary based on your individual circumstances. It is recommended to consult a qualified tax professional or chartered accountant for personalized advice on the impact of your debt on your taxes in India.

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