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You can invest in gold through physical forms like jewellery and coins, or modern financial products such as Digital Gold, Gold ETFs, Gold Mutual Funds, and derivatives.
LTCG on gold attracts 12.5 per cent of tax without the indexation benefit.
Gold has long been considered a safe and stable investment option, especially in uncertain times. Nowadays, investors have more ways than ever to invest in gold—be it through physical forms like jewellery and coins or modern financial products such as Digital Gold, Gold Exchange Traded Funds (ETFs), Gold Mutual Funds, and derivatives.
These investments, however, come with certain tax obligations based on how long you hold the asset. Hence, understanding how income tax applies to gold transactions, such as purchases, sales, and inheritance, is essential for successful tax planning.
So, if you are planning to invest in gold, read on to learn about the different methods through which investments can be made in gold and the tax benefits associated with them.
Taxation Based on Holding Period
Gold investments are classified under capital assets, and gains from them are taxed as either Short-Term Capital Gains (STCG) or Long-Term Capital Gains (LTCG). If gold is sold within 36 months of purchase, gains are treated as STCG and taxed at the investor’s applicable income tax slab rate.
But if the gold is held for more than 3 years, the gains are classified as LTCG and taxed at 12.5 per cent without the benefit of indexation.
Income Taxes On Different Modes of Gold Investment
Physical Gold
On buying a physical form of gold, like jewellery, gold ornaments, gold biscuits, gold coins, etc., taxation applies as mentioned above. According to the Income Tax Act of India, you need to pay a 12.5 per cent tax on LTCG while selling gold. However, the tax is charged as per your income slab in the case of STCG.
Digital Gold
Offered through fintech platforms, digital gold is taxed similarly to physical gold purchases. If you held the digital gold for 2 years or more, the returns are termed long-term capital gains, and returns from gold that are held for less than this period are termed short-term capital gains (STCG).
Paper Gold (ETFs and Mutual Funds)
These refer to gold that appears on paper but cannot be acquired physically. Gold Mutual Funds, Sovereign Bonds, ETFs, etc., come under this type. The income you generate by selling paper gold is referred to as your capital gains. This means investors are liable to pay a 12.5 per cent tax on long-term capital gains on gold sales as per the rules regarding the gold tax in India.
Gold Derivatives
Traded from the commodities market, gains from gold futures and options are considered speculative or non-speculative business income based on the trade type and taxed accordingly. One can also deduct expenses from the income generated by the sale of gold derivatives and create a profit and loss statement to determine your taxable income. Gold derivatives’ returns can be claimed as business income, reducing the tax burden on such transactions.
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al… Read More
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Delhi, India, India
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