Gold is deeply connected to Indian culture and tradition and is considered auspicious. Indians mostly buy this precious metal as ornaments and jewellery.
However, there are other ways you can benefit from this auspicious metal. For instance, you can secure a loan using gold as collateral, an easy way to solve your long-term and short-term monetary crisis. Thus, if you are a loan seeker considering this option, here are some of the top benefits of a gold loan you must know.
One of the most common reasons why people prefer gold loans is because of their low-interest rates. In addition, gold, compared to any other collateral, is considered a preferable option for lenders as they can quickly sell it off in case of discrepancies. Moreover, being a secured credit, the processing time and fees for gold loan is significantly low.
Gold loans do not offer tax exemption benefits for personal expenses, except for a few circumstances. According to several Sections of the Income Tax Act of 1961, you can only avail of gold loan tax benefits if you use the loan amount for the following:
Home improvement
Reconstruction of residential property
Business expenses
Asset purchases other than the property
Under Section 54F of the IT Act of 1961, you can save taxes by claiming exemptions by selling your gold assets. This regulation allows a tax exemption on capital gains when you sell your gold assets. Other than this, you can avail a tax exemption by using the gold credit for home renovation or residential construction up to Rs. 2 Lakhs annually.
No, in India, it is mandatory to have a PAN card to purchase gold worth Rs. 2 Lakhs or more. It is used as an income verification document and also helps to check your creditworthiness while applying for a loan.
You can save tax liabilities according to Sections 54F and 54EC of the Income Tax Act. According to the provision of 54F, if you re-invest the returns from your gold investment in residential property, you can get a tax exemption from the total earnings. For instance, Sovereign Gold Bonds mature at eight years, whose capital gains are tax-free when you redeem them at maturity.
On the other hand, as per the provision of Section 54EC, you can invest your returns within six months and can save the entire tax from those earnings.