What are the tax considerations for NRIs when taking out a gold loan?

Unlike other types of loans, the tax benefits for gold loans depend on how the borrower uses the loan amount.

If the gold loan is used for house purchase, construction or significant repairs, borrowers can claim deductions on the principal repayment up to ₹1.5 lakhs under Section 80C and interest paid up to ₹2 lakhs under Section 24. Additional deductions on interest are available under Sections 80EE and 80EEA.

If the loan is used to purchase assets like bonds or equity, the interest amount can be claimed as a cost of acquisition to reduce capital gains when these assets are sold.

For entrepreneurs, the interest on gold loans taken for business expenses can be treated as a deductible business expense, lowering taxable business income.

Therefore, based on the end use, NRIs taking gold loans can potentially avail of tax benefits on principal repayment under Section 80C, interest payment under Sections 24, 80EE and 80EEA, acquisition cost deduction to lower capital gains, or business expense deduction to reduce taxable income. However, consulting a tax advisor is advisable to determine eligibility for specific deductions. The loan amount itself is not considered taxable income.