{"id":3748,"date":"2020-11-29T05:20:30","date_gmt":"2020-11-29T05:20:30","guid":{"rendered":"https:\/\/www.indifi.com\/blog\/?p=3748"},"modified":"2021-03-18T15:34:22","modified_gmt":"2021-03-18T15:34:22","slug":"all-you-need-to-know-about-business-loans-and-taxes","status":"publish","type":"post","link":"https:\/\/www.indifi.com\/blog\/all-you-need-to-know-about-business-loans-and-taxes\/","title":{"rendered":"All You Need to Know About Business Loans and Taxes"},"content":{"rendered":"\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" loading=\"lazy\" width=\"500\" height=\"282\" src=\"https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2020\/11\/Business-Loans-and-Taxes-500x282.jpg\" alt=\"Business-Loans-and-Taxes\" class=\"wp-image-3749\" srcset=\"https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2020\/11\/Business-Loans-and-Taxes-500x282.jpg 500w, https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2020\/11\/Business-Loans-and-Taxes-768x433.jpg 768w, https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2020\/11\/Business-Loans-and-Taxes-870x490.jpg 870w, https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2020\/11\/Business-Loans-and-Taxes.jpg 912w\" sizes=\"(max-width: 500px) 100vw, 500px\" \/><\/figure>\n\n\n\n<p>If you want to start a business and are looking for financing, you can always get a business loan from banks, non-banking financial institutions, or other private lenders. You may need a business loan or maybe expanding the business or the company, hiring new staff, increasing the inventory or purchasing new materials, a new office space, or even renovating your old one.<\/p>\n\n\n\n<p>So, once you know the purpose for which you need a business loan, you can think of ways to avail of one.<\/p>\n\n\n\n<p>Also Read: <a href=\"https:\/\/www.indifi.com\/blog\/new-tax-or-old-tax-regime-which-one-should-you-pick\/\" target=\"_blank\" rel=\"noreferrer noopener\">New Tax or Old Tax Regime \u2013 Which One Should You Pick?<\/a><\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_67_1 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.indifi.com\/blog\/all-you-need-to-know-about-business-loans-and-taxes\/#Types_of_Business_Loans\" title=\"Types of Business Loans\">Types of Business Loans<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.indifi.com\/blog\/all-you-need-to-know-about-business-loans-and-taxes\/#1_Risks\" title=\"1. Risks\">1. Risks<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.indifi.com\/blog\/all-you-need-to-know-about-business-loans-and-taxes\/#2_Interest_Rates\" title=\"2. Interest Rates\">2. Interest Rates<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.indifi.com\/blog\/all-you-need-to-know-about-business-loans-and-taxes\/#Components_of_Business_Loans\" title=\"Components of Business Loans\">Components of Business Loans<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.indifi.com\/blog\/all-you-need-to-know-about-business-loans-and-taxes\/#Tax_Benefits_of_Business_Loans\" title=\"Tax Benefits of Business Loans\">Tax Benefits of Business Loans<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.indifi.com\/blog\/all-you-need-to-know-about-business-loans-and-taxes\/#1_Tax-Deductible_Interest\" title=\"1. Tax-Deductible Interest\">1. Tax-Deductible Interest<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.indifi.com\/blog\/all-you-need-to-know-about-business-loans-and-taxes\/#2_Tax-Deductible_Expenses\" title=\"2. Tax-Deductible Expenses\">2. Tax-Deductible Expenses<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.indifi.com\/blog\/all-you-need-to-know-about-business-loans-and-taxes\/#Exceptional_Cases_for_Tax_Benefits_on_Business_Loans\" title=\"Exceptional Cases for Tax Benefits on Business Loans\">Exceptional Cases for Tax Benefits on Business Loans<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.indifi.com\/blog\/all-you-need-to-know-about-business-loans-and-taxes\/#1_Refinancing_of_Loans\" title=\"1. Refinancing of Loans\">1. Refinancing of Loans<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.indifi.com\/blog\/all-you-need-to-know-about-business-loans-and-taxes\/#2_Buying_Another_Business\" title=\"2. Buying Another Business\">2. Buying Another Business<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.indifi.com\/blog\/all-you-need-to-know-about-business-loans-and-taxes\/#3_EMI_Repayment\" title=\"3. EMI Repayment\">3. EMI Repayment<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.indifi.com\/blog\/all-you-need-to-know-about-business-loans-and-taxes\/#Other_Benefits_of_Business_Loans\" title=\"Other Benefits of Business Loans\">Other Benefits of Business Loans<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.indifi.com\/blog\/all-you-need-to-know-about-business-loans-and-taxes\/#1_Customised_Loans\" title=\"1. Customised Loans\">1. Customised Loans<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.indifi.com\/blog\/all-you-need-to-know-about-business-loans-and-taxes\/#2_Flexible_Payment_Options\" title=\"2. Flexible Payment Options\">2. Flexible Payment Options<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.indifi.com\/blog\/all-you-need-to-know-about-business-loans-and-taxes\/#3_Benefits_for_Startups\" title=\"3. Benefits for Startups\">3. Benefits for Startups<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.indifi.com\/blog\/all-you-need-to-know-about-business-loans-and-taxes\/#Final_Thoughts\" title=\"Final Thoughts\">Final Thoughts<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Types_of_Business_Loans\"><\/span>Types of Business Loans<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Business Loans are of two types. The first one is a secured business loan, while the second is an <a href=\"https:\/\/www.indifi.com\/collateral-free-business-loans-india\" target=\"_blank\" rel=\"noreferrer noopener\">unsecured business loan<\/a>. The major difference between the two types of loans is that lenders usually ask for a security or collateral deposit when you choose to go for a secured business loan. While in the case of unsecured business loans, you don&#8217;t need to deposit any such collateral.<\/p>\n\n\n\n<p>Likewise, there are other notable differences between the two types of loans, which you will find in the following section.<\/p>\n\n\n\n<p>Also Read:&nbsp;<a rel=\"noreferrer noopener\" href=\"https:\/\/www.indifi.com\/blog\/9-tax-mistakes-should-never-make\/\" target=\"_blank\">9 Common Tax Mistakes You Should Never Make<\/a><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_Risks\"><\/span><strong>1.<\/strong> <strong>Risks<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Secured business loans provide a sense of security for the lenders. However, they tend to pose risks for the borrowers. For instance, if you borrow a secured loan and fail to repay it, you could lose that asset you have deposited as security.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_Interest_Rates\"><\/span><strong>2.<\/strong> Interest Rates<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Depositing security or collateral for secured business loans means that you can get them at nominal interest rates. Moreover, the terms and conditions of such loans are much more favorable for the borrower. Lenders usually refrain from releasing higher amounts or lending at higher rates if they feel that you cannot return the money or if your credit score is low.<\/p>\n\n\n\n<p>However, collateral eliminates many of these shortcomings, as lenders would be willing to let go of them due to the security that you deposit.<\/p>\n\n\n\n<p>Also Read:&nbsp;<a rel=\"noreferrer noopener\" href=\"https:\/\/www.indifi.com\/blog\/best-tax-saving-practice-for-e-commerce-sellers\/\" target=\"_blank\">Tax Saving \u2013 Best Practice For E-Commerce Sellers<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Components_of_Business_Loans\"><\/span>Components of Business Loans<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A <a href=\"https:\/\/indifi.com\/business-loan\" target=\"_blank\" rel=\"noreferrer noopener\">business loan<\/a>, just like most other types of loans, has two components: a principal and interest. The principal is the amount of money that you receive from the lender. And over time, a sum of interest gets accrued on this principal amount. So, when you repay the loan, you pay the principal amount and the interest accrued during the time you kept or used the money.<\/p>\n\n\n\n<p>The interest has a prominent role in repaying business loans because it helps the lender fund the loan and lets them know the total amount of money you would repay.<\/p>\n\n\n\n<p>Also Read:&nbsp;<a href=\"https:\/\/blog.indifi.com\/best-tax-saving-practices-for-shop-owners\/\">Best Tax Saving Practices For Shop Owners<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Tax_Benefits_of_Business_Loans\"><\/span>Tax Benefits of Business Loans<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Availing business loans helps you meet your short-term or long-term financial requirements and save on taxes. So, you get to enjoy a host of tax savings and benefits when you repay the loan. The various tax deductions that you get from borrowing money for business purposes are as follows:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_Tax-Deductible_Interest\"><\/span><strong>1.<\/strong> Tax-Deductible Interest<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>As discussed earlier, a business loan, like most other types of loan, has both the principal and interest components. You can cut down on taxes on your business loan&#8217;s interest component by deducting the amount from your gross income. But do make sure that you have all the records in place to submit them when you repay the loan and claim tax benefits.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_Tax-Deductible_Expenses\"><\/span><strong>2.<\/strong> Tax-Deductible Expenses<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Any expenses that you incur from running the business, which you deduct from the gross revenue or profits, are exempt from taxes. It would be best if you took care to deduct such expenses from your gross revenues or profits before estimating your tax liabilities.<\/p>\n\n\n\n<p>Also Read:&nbsp;<a href=\"https:\/\/blog.indifi.com\/best-tax-saving-practice-for-travel-agencies\/\">Best Tax Saving Practice For Travel Agencies<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Exceptional_Cases_for_Tax_Benefits_on_Business_Loans\"><\/span>Exceptional Cases for Tax Benefits on Business Loans<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>While you can save on taxes for the interest on the business loans that you borrow and the expenses you incur for keeping the business afloat, there are various cases where such taxation rules don&#8217;t apply. So, you must know the exceptions before you borrow money. You will find those exceptions in the following section:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_Refinancing_of_Loans\"><\/span><strong>1.<\/strong> Refinancing of Loans<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>If you use a second or third loan that you have borrowed from the same lender to pay the first loan&#8217;s interests, you won&#8217;t be eligible for tax savings. However, you can still claim tax benefits for the interest accrued on the second or third loan.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_Buying_Another_Business\"><\/span><strong>2.<\/strong> Buying Another Business<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>If you decide to buy another business, then tax deductions apply to running that business. If not, then you won&#8217;t be able to get any tax benefits on your business loans.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3_EMI_Repayment\"><\/span><strong>3.<\/strong> EMI Repayment<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>If you choose to repay your business loan in the form of EMI, you cannot avail of any tax benefits.<\/p>\n\n\n\n<p>Also Read:&nbsp;<a href=\"https:\/\/blog.indifi.com\/best-tax-saving-practice-for-restaurants\/\">Best Tax Saving Practice For Restaurants<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Other_Benefits_of_Business_Loans\"><\/span>Other Benefits of Business Loans<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Besides tax benefits, borrowing money to establish a business also has other advantages. For example, the amount that you borrow not only serves various business purposes but may also have flexible repayment options depending on the lender. Likewise, there are a host of other benefits of borrowing money to set up a business.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_Customised_Loans\"><\/span><strong>1.<\/strong> Customised Loans<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Business loans are of many types. You can also customize them to suit your requirements.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_Flexible_Payment_Options\"><\/span><strong>2.<\/strong> Flexible Payment Options<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Many lenders, including several non-banking financial institutions, also offer flexible payment options for business loans. Such payment options make it easier for you to get reimbursements on the loans.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3_Benefits_for_Startups\"><\/span><strong>3.<\/strong> Benefits for Startups<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>If you are looking to establish a startup organization or business, you can get different types of business loans to save taxes. You should also know that startups are entirely exempt from taxes for up to three years when they borrow certain types of <a href=\"https:\/\/www.indifi.com\/collateral-free-business-loans-india\" target=\"_blank\" rel=\"noreferrer noopener\">business loan online<\/a>.<\/p>\n\n\n\n<p>Also Read:&nbsp;<a href=\"https:\/\/blog.indifi.com\/importance-of-income-tax-return-filing\/\">Why Income Tax Return Filing Is Important<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Final_Thoughts\"><\/span><strong>Final Thoughts<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Various taxation rules apply when it comes to getting loans for starting a business. If you want to establish a business or startup organization of your own and are looking to get loans for the purpose, you should know the tax and other benefits you can get from it. Make sure that you do your research before you borrow money to begin with your business.<\/p>\n\n\n\n<p>In that way, you will know the different types of business loans you can get and see whether they are exempt from taxes.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link has-background has-vivid-green-cyan-background-color\" href=\"https:\/\/www.indifi.com\/business-loan\" target=\"_blank\" rel=\"noreferrer noopener\">Apply Loan For Business<\/a><\/div>\n<\/div>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>If you want to start a business and are looking for financing, you can always get a business loan from banks, non-banking financial institutions, or other private lenders. You may need a business loan or maybe expanding the business or the company, hiring new staff, increasing the inventory or purchasing new materials, a new office [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":3749,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[141],"tags":[766],"_links":{"self":[{"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/posts\/3748"}],"collection":[{"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/comments?post=3748"}],"version-history":[{"count":5,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/posts\/3748\/revisions"}],"predecessor-version":[{"id":4069,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/posts\/3748\/revisions\/4069"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/media\/3749"}],"wp:attachment":[{"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/media?parent=3748"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/categories?post=3748"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/tags?post=3748"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}