How to Avail Tax Benefits on a Gold Loan
Gold loans are popular funding options that come with attractive features and benefits. High-value financing combined with a long repayment tenure let you cover big-ticket expenses and complete repayments with ease. When getting one of these loans, you should also look for gold loan tax exemption benefit available.
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 a tax exemption on gold loan 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 gold 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. When the loan is used to pay for business expenses, the interest paid on the loan amount is a business expense that can be deducted under the Income Tax Act.
4. Asset purchase
Tax exemption on gold loan 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.
A borrower should also know that the total loan amount is kept out of the income, so the loan is not taxable.
Features and benefits of gold loan
- Part-release facility
With our part release facility, you can repay a part of your loan and take part of your gold jewellery back before the end of your loan tenure. - No part-prepayment fee or foreclosure fee*
Repay a part of your loan in advance or pay the entire amount at no extra cost. - Transparent evaluation
We use best-in-class karat meters across all our branches to make sure you get the most value for your gold. - Free insurance of gold
Our free insurance covers against theft or misplacement of your gold jewellery while it is in our custody. - Convenient repayment option
We offer multiple repayment options where you may choose to pay interest on a monthly, bi-monthly, quarterly, half-yearly, or annual basis as per your convenience. Please note that the principal amount and pending interest, if any, will be due for payment at the time of loan maturity. - Easy application process
Apply for a gold loan online. Our representative will help you with your application when you visit our Gold Loan branch in your city. - Gold loan of up to Rs. 2 crore
We offer instant gold loans starting from Rs. 5,000 up to Rs. 2 crore. You can choose the amount that suits you best from the offer extended to you. - 800 branches and growing
We have recently opened 60 new branches and are adding more across India. We are also opening new branches in the cities that we operate in.
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 licence, NREGA job card and letter from National Population Registration.
- Proof of address such as voter ID card, Aadhaar Card, ration card, passport, utility bills, NREGA job card and letter from National Population Registration, etc.
Interest rates and charges
Gold Loan interest rates start from 9.50% p.a., with a minimal processing fee of 0.15% of the loan amount (inclusive of applicable taxes).
Subject to a minimum Rs 99/- (Inclusive of applicable taxes) & maximum of Rs 600/- (Inclusive of applicable taxes)
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 tax benefits on gold loan to enhance savings on loan repayment.
Bajaj Finserv app for all your financial needs and goals
Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.
You can use the Bajaj Finserv App to:
- Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.
- Invest in fixed deposits and mutual funds on the app.
- Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.
- Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions.
- Apply for Insta EMI Card and get a pre-approved limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on Easy EMIs.
- Shop from over 100+ brand partners that offer a diverse range of products and services.
- Use specialised tools like EMI calculators, SIP Calculators
- Check your credit score, download loan statements and even get quick customer support—all on the app.
Download the Bajaj Finserv App today and experience the convenience of managing your finances on one app.
Frequently asked question
Gold loan tax exemption can be achieved when the borrowed funds are invested in specified tax-saving instruments like bonds or schemes. The interest paid on the gold loan becomes eligible for deduction under certain tax regulations, reducing your taxable income.
In India, gold loans themselves are not taxable, but the interest paid on them can have tax implications. Eligibility for a tax exemption on gold loan interest payments exists under specific conditions, such as when the loan is used for specified purposes like property purchase or business investments, as per the Income Tax Act.
In India, there is no specific exemption for the quantity of gold owned under income tax laws. However, gold loan interest payments may qualify for tax deductions under certain conditions.
TDS (Tax Deducted at Source) is generally not applicable on gold loans. When you take a loan against gold, the bank or financial institution provides you with a loan amount based on the value of the gold pledged, but there are no immediate tax implications on this transaction. However, if you default on the loan and the lender sells your gold, any gains made from the sale may be subject to capital gains tax. It's advisable to consult a tax professional to understand your specific obligations and to explore any potential tax benefits associated with gold loans.
The maximum loan amount you can avail of against gold varies depending on the lender and the value of the gold pledged. Bajaj Finance offers loans of up to 75% of the gold's market value. For example, if your gold is valued at ₹1,00,000, you may be eligible for a loan of up to ₹75,000. Some lenders may impose a cap on the maximum loan amount, often ranging from ₹1 lakh to ₹50 lakh. But with Bajaj Finance, you can avail a loan of up to Rs. 2 crore.
