Gold loans are secured loans, which can be beneficial in urgent financial requirements. There are many banks and non-banking financial institutions (NBFCs) that provide various gold loan schemes to individuals. To receive the funds, you can pledge your gold as collateral and get a gold loan. Emergencies benefit greatly from a gold loan, especially for specific expenses due to the potential tax benefits of a gold loan. It’s important to keep in mind that the tax deduction on a gold loan depends on how you use the funds.
Home Improvement Work
Home repair works such as renovation, a fresh coat of paint, or fixing a broken or leaking roof can be expensive. You can avail of a gold loan to cover the expenses for house improvement, based on the one gram gold price today, and enjoy tax benefits. You are eligible for a tax deduction under Section 80C of the Income Tax Act, 1961, if you have taken a gold loan for home repair and improvement. A loan of up to ₹1.5 lakh can be obtained, with the deduction applied to the total loan amount.
Business Expense
Taking gold loan online or through a physical branch to cover specific business expenses, such as capital expenditures or day-to-day expenses, also offers tax benefits. The interest paid on the gold loan taken online for business purposes can be claimed as business expenses under the Income Tax Act, 1961. This deduction can help businesses to bring down their tax liabilities.
Asset Purchase
You can claim the interest you pay towards the gold loan as a cost of acquisition if you use the loan to purchase assets other than your home, such as equity, bonds, or other assets. This tax deduction can reduce your taxable capital and cut your tax liability. However, you can claim this deduction in the financial year in which you sell your assets.
Opting for gold loans has several tax benefits, and to avail of the tax benefits, take a gold loan only from authorised lenders instead of local moneylenders. Certain income tax acts may allow you to deduct the interest on your gold loan. If you use a gold loan for business expenses, asset purchases, or any home improvement work, you can claim the tax benefits.
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