Are gold ETFs taxed similar to debt funds? Is it a better option compared to physical gold and SGBs?

Income Tax Income from Capital Gains
,
1

I’m planning to invest in gold ETFs and would like to understand their tax implications. How are gold ETFs taxed in terms of short-term and long-term capital gains? Are they taxed similarly to debt funds? Also, are there any other benefits of investing in gold ETFs compared to physical gold or SGBs?

2

Not just you, there are many people considering Gold ETFs these days. They are an alternative to other gold investments like physical gold and SGBs.

Gold ETFs (Exchange Traded Funds) let you invest in gold digitally.

  • Each unit represents a fraction of gold.
  • You can buy/sell these units on stock exchanges, just like shares.

When it comes to physical gold, storage and security are major concerns, which you don’t have to worry about with Gold ETFs.

As for SGBs, the government hasn’t announced any recent issuances, limiting their availability. Gold ETFs, on the other hand, remain easily accessible throughout the year.

Gold ETFs were previously taxed similarly to debt funds, meaning the gains were taxed at slab rates irrespective of the holding period. However, the taxation rules have changed after the amendments introduced in Budget 2024.

Now, the tax treatment for Gold ETFs is almost aligned with listed stocks and equity mutual funds. Here’s how they will be taxed:

Tax rates for Gold ETFs
Tax rates for Gold ETFs1150×332 34.3 KB

*New rates will come into effect from April 1, 2025

Just remember, there might be a few limitations too.

Liquidity challenges: Gold ETFs don’t trade as often as popular stocks, so it might become difficult to sell immediately.

Tracking error: Gold ETFs aim to match gold prices but often fall short. For example, if gold prices rise by 12% annually, your ETF might deliver 11.5% instead.

Costs: Gold ETFs come with expense ratios, brokerage fees, and transaction costs that will dilute some part of your returns.

3
  1. My LTCG from equity shares for FY 2024-2025 is Rs. 1,14,000/-
  2. I sold 200 units of UTI Gold ETF (GOLDSHARE) @ 75.25 on 28-03-2025. These units were purchased on 23-04-2008 @ 12.08.
    The indexed cost of acquisition comes to 32.015.
    Thus my gross LTCG on this TRXN comes to 200 X (75.25 - 32.015) = 8647/-
    Since total LTCG from the above two is below 1,25,000/- I presume there will be no LTCG for me.
    Am I right?
4

Gold ETF rates amendend w.e.f. 01.04.2025 . Prior to that LTCG was 20% without indexation and basic LTCG exemption was Rs. 1,00,000/- .
In my view, LTCG @ 20% on 8647/- is applicable if you sale before 31.03.2025 as the basic LTCG limit of 1,00,000/- is already crossed.

5

Thanks Anitaji for your quick response.
But I am confused. Please clarify the following w. r. t. A Y 2025-2026 :

  1. The Gold ETF units were purchased in 2008, i. e. before 31 st March 2023. Am I not eligible for Indexation?
  2. Am I not eligible for grandfathering of LTCG for purchase before 31 st Jan 2018?
  3. I read somewhere that exemption limit for LTCG is now 1.25 lakhs.
  4. In which item of the ITR Form, LTCG of Gold ETFs is to be shown?
6

Dear Sir

You are very much entitled for indexation & Grandfathering .

The Capital Gain Tax Rates for funds got amends from 24.07.2024

But amendment for ETF is applicable from 01.04.2025

Prior to amendment the tax rate was 20% with EXEMPTION OF 1,00,000

If you redeem before 01.04.2025 , rate will be 20% with EXEMPTION OF 1,00,000.

You have already availed basic exemption of 1,25,000 on sale of other Funds
So , you need to pay tax @ 20% : Rs. 8647/

7

Hi @nayakd1,

The ₹1.25L LTCG exemption is available only on listed shares and equity MFs/ETFs. In case of gold ETFs, this exemption will not be allowed.

Moreover, for gold ETFs purchased before 1st April 2023, and sold after 23rd July 2025, the LTCG will be taxed at flat 12.5% without the indexation benefit.

Hope this helps!

8

Thanks a lot for prompt response and concise explanation.

9

Thank you Anitaji for prompt and concise clarification.

10

Thanks. In that case, should I enter this item in Schedule 112A just like one enters details of sale of equity shares?
Or is there any other Schedule / Cell for entering sale of Gold ETF?