Gold loans are popular funding options that come with attractive features and benefits. High-value financing combined with a long repayment tenor let you cover big-ticket expenses and complete repayments with ease. Another top advantage to look for when availing of such advances is the gold loan tax benefits.
Any tax deduction or exemption that a borrower may avail depends on the usage of the funds and the quantum of loan utilised. Below are listed the avenues where a gold loan borrower can enjoy tax benefits.
What are the tax benefits of Gold Loan
1. Home improvement financing
Borrowers can avail tax exemptions on gold loan amounts utilised towards financing home improvement. The home improvement tax benefits are available under Section 80C of the Income Tax Act 1961 with an annual capping of Rs. 1.5 lakh. Such deduction is available for the loan principal repaid only and is applicable for all types of home repair, replacement, and improvement expenses.
2. Residential property purchase or construction
The Income Tax Act’s Section 24 makes a borrower eligible for gold loan tax exemption if the amount is used for residential property purchase or construction. The deduction amount available annually is limited to Rs. 2 lakh and is applicable for interest payable towards such loan repayment. The residential property must be self-occupied for the deduction to apply.
3. Use towards business expenses
The gold loan tax benefits are available to borrowers if they utilise the loan amount towards business expenses. If the loan is utilised to meet expenses incurred by a business, the interest applied to such loan amount is deductible as a business expense under applicable provisions of the Income Tax Act.
4. Asset purchase
Gold loan tax exemption is also applicable if the amount availed is utilised for purchase of an asset other than property. A borrower can avail such benefit only in the financial year when the asset is sold. The interest paid towards such loan amount utilised for asset purchase is considered as the cost of acquisition, effecting tax benefits to ensure.
Apart from the mentioned gold loan tax deductions, a borrower must know that the total loan amount availed is kept out of the purview of income, which makes the loan non-taxable.
Documents Required to Avail Gold Loan
The necessary documents to submit for gold loan application revolve around KYC norms set by the lending institutions. Common gold loan documents needed for application include the following.
- Proof of identity like Aadhaar card, PAN card, Voter ID card, Passport, driving license, etc.
- Proof of address such as Voter ID card, Aadhaar card, Ration card, passport, utility bills, and the likes.
- Income proof, involving salary slips, bank account statements, financial statements, etc. depending on the borrower’s occupation.
Interest Rates and Charges
The gold loan interest rate from Bajaj Finserv is kept affordable and competitive due to its secured nature and increasing demand for the financing. Gold loan rates start from as low as 11%, with zero processing fees and nominal documentation charges.
Compare interest rates and charges on gold loans to find the most affordable borrowing option for easy repayment of the advance. Make the most of available gold loan tax benefits to enhance savings on loan repayment.