Service tax on personal loan

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Querist : Anonymous

Querist : Anonymous (Querist)

14 May 2013 dear friends,

pls let me know whether service tax is applicable on personal loan other than credit card ??

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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04 July 2013 What is personal loan? with bankers?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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24 July 2025 Regarding **service tax on personal loans (other than credit cards)**:

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### Key points:

* **Service tax is applicable on financial services** provided by banks, NBFCs, or other financial institutions.

* **For loans (including personal loans), the service tax is charged on the “service portion” i.e., the interest or other fees/charges collected on the loan, not on the principal amount.**

* The **principal amount of the personal loan is not taxable** as service tax is on services rendered, not on loan disbursement itself.

* **Credit card services attract service tax separately** under a different category.

* **For personal loans, the service tax is levied on the interest portion or processing fees charged** by the lender.

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### Summary:

* No service tax on the amount of personal loan disbursed (principal).
* Service tax applies on the interest and processing fees or any other service charges related to the personal loan.
* The rate applicable was generally 15% (including cess) during the service tax regime before GST.

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If you want details about exact notifications or how it was treated before GST, I can help with that too.

Would you like me to explain how GST treats personal loans now?

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