Confused about income tax on gold loan? Here's your complete taxation guide

I recently bought a second home which I shall rent out. What are the different tax deductions that can I claim once I let it out?

Rental income is taxable under the head ‘income from house property’. Under Section 24 of the Income Tax Act, 1961, you can claim a deduction on the municipal taxes paid during the year on the property. Thereafter, from this net amount, 30 per cent is allowed as standard deduction. There is no deduction for actual repair or maintenance.

In case you have borrowed money (through a home loan) to acquire or build this house, the interest payable can also be claimed as a deduction. However, after claiming all the above deductions, where the net result of income from house property is a loss, this can be adjusted against any other income during the year. However, such adjustment of loss is capped at Rs 200,000. Any excess can be carried forward for the next eight years to be adjusted against any future loss, which may arise under the head income from house property.

I am a salaried person and have a personal loan and a gold loan. Are there any tax deductions available on the interest portion of such loans for the salaried class?

Unfortunately, no deduction is available on interest paid on personal or gold loan. If you were in business and used the funds for business purposes, you could have claimed the interest as business expense.

I am no longer a citizen of India but I own a property there which I want to sell. The ongoing rate for the property is around Rs 18 million, according to my broker. I want to know the tax implications and how I can repatriate the funds to Canada.

Any gains earned on the sale of the property is subject to tax in India. Whether the gain will be long term or short term will depend on the holding period of the property. If held for more than two years, the resultant gain shall be termed as long-term capital gain (LTCG) and will be subject to tax at 20 per cent plus applicable surcharge and cess. You will also be eligible for indexation benefit, that is, the cost of acquisition and/or improvement will be increased for the inflation factor over the holding period. Any expenditure incurred in relation to the sale of property, such as brokerage, etc, is also deductible.

You are no longer a citizen of India, but you have not mentioned whether you are a non-resident of India. If you are a non-resident, the buyer will withhold tax at the maximum marginal rate applicable in your case, unless you provide him with the lower withholding certificate obtained from the Indian tax authorities. Otherwise, at the time of filing your return of income in India you will need to claim a refund of excess taxes deducted.

Further, you may also be subject to tax on such gains in your home country in accordance with its local tax laws. However, you should be able to claim the credit of taxes paid in India in accordance with the tax treaty India has with that country, where you are resident, which can give you relief from double taxation. Regarding your other query on remittance of sale proceeds, you should reach out to your authorised dealer (banker) for guidance, but there should not be any difficulty in remittance. 

I plan to sell some inherited gold and jewellery. Will there be any tax on selling these?

One capital asset for computing capital gains under Section 45 of the Income-Tax Act includes jewellery, ornaments made of gold, etc. Where such gold/jewellery is given to you as a gift by your parents, there will be no tax on such a gift. However, if you sell it, you will be liable to tax on the capital gains earned on such a sale. Since the holding period of the items is more than three years (including the period of holding by your parents), the resultant gain shall be long-term and taxed at 20 per cent plus applicable surcharge and cess. Capital gains will be computed by deducting the indexed cost of acquisition from the sale consideration received. To calculate capital gains, the cost of acquisition will be taken as the cost in the hands of the previous owner (your family). However, in the case of an asset purchased before April 1, 2001, you have the option to substitute the cost of acquisition with the higher of the actual cost of acquisition to the previous owner or fair market value of the asset as on April 1, 2001. Since you do not know the actual cost price of these capital assets in the hands of your parents, you may consider getting the valuation done as on April 1, 2001, for determining its cost for calculating capital gain.

The writer is partner and leader, personal tax, PwC India. The views expressed are the expert’s own. Send your queries to yourmoney@bsmail.in