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Muhammad Haider
Muhammad Haider,
Category: Tax
Satisfied Customers: 817
Experience:  Director at HM Accountax
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I need second opinion on below question please** I have a

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Hi,
**I need second opinion on below question please**I have a saving account with reputed bank in India.I also have fixed deposit account with around 80k GBP equivalent Indian Rupees.I am earning 5.5% interest on the fixed deposit account. The interest is accrued quarterly and cumulative(re-invested in the account).The fixed deposit account is auto renewed every 2 years on the maturity with the new interest rate available at that time.Now, I am in need of some money and I asked bank to break the FD so I can transfer the money here in UK. The UK tax has been paid on all interest accrued so far.The bank has offered that its branch in UK can give me loan in GBP for upto 90% of the current balance of my Fixed deposit. The fixed deposit will be a security for them and will be lien marked. The interest rate payable on the loan will be 3%. This way I do not need to break the fixed deposit and would not loose the interest.Do I have to pay any UK tax on drawing this loan from the bank ?
Customer: replied 1 month ago.
I ask about loan being taxable or not because I know taking out loan from some types of the investment bonds are chargeable and so, liable for tax. I just wanted to make sure taking out a secure loan on fixed deposit is not chargeable because there is an interest being accrued on the fixed deposit every year and that should be only chargeable.
Customer: replied 1 month ago.
Please don’t remove above question.

Hi,

I am an advisor at JA and happy to assist you.

There is no tax on loans.

Regards

Muhammad

Customer: replied 1 month ago.
Thank you for your reply Muhammad. I have heard that there are tax when you take out loan on some investment bonds. They call it chargeable gains. Would taking out the loan secured on the fixed deposit also be called chargeable gain ?

No, there is nothing like this. I have never heard this in my life

Customer: replied 1 month ago.
I know, personal loans does not attract UK tax but this loan is secured based on the fixed deposit. My fixed deposit account will be lien marked and if the loan is not paid on time, it will be recovered from my fixed deposit account.

Still its not taxable.

Customer: replied 1 month ago.
May be some investment policies and not bonds ? Have you heard about part surrender of policy ? And of the loan is taken form policy, it’s treated as a part surrender.

Is this question related to UK or US?

Customer: replied 1 month ago.
UK
Customer: replied 1 month ago.
I am UK resident
Customer: replied 1 month ago.
Can you guide for UK tax ?

See based on your explanation, its a loan and its not liable to UK taxes.

Customer: replied 1 month ago.
On investment policies, you can only draw 5% of the premium and if you take out more, you pay tax on it.

But its not your investment, you are borrowing money from bank and security is your deposit in the same bank. Its loan and not investment Unless i am missing out something

Customer: replied 1 month ago.
would you call an investment when you create a fixed deposit account for a fixed interest rate ?
Customer: replied 1 month ago.
Or the investment would not have any fixed interest rate at all ?
Customer: replied 1 month ago.
Sorry, I am very novice on this and want to do all things right. Forgive me for my stupid questions.
Customer: replied 1 month ago.
It’s loan on my fixed deposit as a security.
Customer: replied 1 month ago.
Do you call deposit as a investment if it earns a fixed rate of interest and it’s accrued on a quarterly bases ?

Yes, its investment and you pay taxes on interest recieved

Customer: replied 1 month ago.
Thank you for your answer. Yes I am paying taxes on the interest earned. But my question is do I have to pay tax or declare the loan amount ?
Customer: replied 1 month ago.
The loan is going to be taken by securing the fixed deposit.
Customer: replied 1 month ago.
I understand you have said that I do not have to pay tax on the loan but I can see in some of the investment types the tax is payable on the loan taken( they call it part surrender) I hope this is not the case with the securing the loan on the fixed deposit.

No, you don't need to pay tax on loan. If you are going to use your deposit in India to pay off the loan then was this balance earned in India? If yes, what was the source? were you UK resident at that time?

Customer: replied 1 month ago.
I was UK resident and I have paid on the interest earned in UK. I do not claim remittance bases. I pay tax in UK for all my interest income earned in India on arises bases

What was the source of the deposit?

Customer: replied 1 month ago.
I transferred from UK.

Then there is NO TAX ON THE LOAN.

Customer: replied 1 month ago.
Some of them - I sold a flat in India and paid/declared CGT in UK

STILL THERE IS NO TAX ON THE LOAN.

Muhammad Haider and other Tax Specialists are ready to help you
Customer: replied 1 month ago.
Thank you. I accepted your answer. Cheers.

welcome

Customer: replied 1 month ago.
I would not pay the tax when I repay the loan with the deposit right ? All the tax have been paid on the deposit money.
Customer: replied 1 month ago.
I am not claiming on remittance bases. I pay tax in UK on arises bases

No, you won't pay any tax now as tax is already paid

Customer: replied 1 month ago.
Thank you.

Welcome