According to estimates, the organised gold loan market is currently worth ₹ 4,149 billion and is predicted to increase at a CAGR of 19.5 percent over the next few years, reaching ₹7,557 billion by FY2024. When compared to other loan options, a high percentage of consumers choose gold loans.
Gold loans are popular financial choices with appealing features and benefits. You can meet huge expenses with increased financing options and a long repayment term. The gold loan tax benefits are another significant benefit to consider when taking out such loans.
Any tax deduction or exemption that a borrower may be eligible for is dependent on how the funds were used and the amount of loan taken out. Following are the tax benefits available to gold loan borrowers-
What are the Tax Benefits of Taking out a Gold Loan?
You can enjoy tax benefits on loans such as home loans as per Section 80C of the Income Tax Act. However, it is different for gold loans. But, there are several ways to get tax advantages on your gold loan, including:
1. Home Renovation – Your home requires ongoing maintenance. Whether you need to cover large repair expenditures or make upgrades to comply with new housing requirements, the amount required could be substantial. You can seek out a gold loan against your gold holdings and claim tax benefits on gold loans to offset these costs. Also, you can avail a tax deduction under section 80C for the loan of home improvement & renovation projects. This deduction is limited to ₹ 1.5 lakh per year and applies to the principal amount.
2. Purchase or Construction of Residential Property – Home loans may not always be sufficient to meet the diverse cash requirements of purchasing or developing residential property. You can efficiently use a gold loan to meet such financial necessities. Also, you can deduct the interest component of such a gold loan from your taxes in that year. As per the Income Tax Act, individuals can avail of a tax deduction of up to ₹2 Lakh in a fiscal year if the home they buy or build is self-occupied.
If the property is rented, you can deduct your interest payments from your taxable income for that year.
3. Business Expenditure – If funds are used to offset business expenses, you can also profit from tax advantages on gold loans. For instance, if a person takes out a loan for a business purpose, he can deduct the interest of the gold loan as a business cost. This reduces the overall taxable income from his firm and, as a result, his tax liability.
4. Buying an asset – The money borrowed for a gold loan is tax-free if it is utilised to acquire something other than real estate. Borrowers are only eligible for these advantages during the financial year in which the asset is sold. The loan interest is treated as a cost of purchase, resulting in tax advantages. For example, if you buy stocks with a gold loan in 2020 and sell them in 2024, the tax benefit will kick in in Assessment Year 2024–25.
How can you access Gold Loans?
An individual needs to choose from a variety of gold loan schemes available in the market based on the amount and period of the loan. Evaluate gold loan interest rates on loans and charges, as well as a reliable portal, to get the most cost-effective lending option for speedy repayment.
Muthoot FinCorp’s gold loan interest rates are designed to give consumers a pleasant borrowing experience. The gold loan interest rate for such loans is determined by the required loan amount, which starts at 11.99% per annum, and the gold loan plan chosen. The gold loan interest rate is integrated into the gold loan calculator on the website, assisting you to determine the scheme and payment plan for you. Not just that, Muthoot FinCorp Gold Loan has a variety of benefits and some of the attributes are listed below –
- Quick Approval – Because the documentation process is simple, an individual can acquire approval quickly.
- Nominal processing fees – The processing cost at Muthoot FinCorp starts at just ₹20 and varies depending on the scheme.
- Special schemes – To effectively serve the consumers, special schemes are created based on your financial needs.
- Maximum Loan to Value – One can borrow up to 75% of the value of their pledged gold holdings.
Lastly, people can choose the scheme that suits them best as per their needs & utilise potential gold loan tax benefits to increase loan benefits.