How are various gold investments taxed?

Income Tax Income from Capital Gains
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The tax rates and holding period for various assets were revised in Budget 2024. This affects gold investments as well. Refer to this thread for updated tax rates: Tax on gold mutual funds, gold ETFs and SGBs after budget 2024

Previously, the only way to invest in gold was to buy physical gold like coins or bars. However, today, you have various options for investing in gold, such as digital gold, gold ETFs, and gold bonds. These new options are convenient and flexible, and they don’t require you to store physical gold.

But, no matter which type of gold investment you pick, they all fall into the “capital assets” category. This means if you make money by selling them, you will have to pay tax on the profit.

Let’s dive into the different forms of gold investments and understand their taxation:

Physical Gold: Traditional gold investments, like gold coins and ornaments, have been a go-to choice for many in India. While you get something tangible when you buy physical gold, you will have to ensure the safety of such a high-value asset.

Tax Implications: When you sell physical gold after holding it for more than 3 years, it’s considered a Long-Term Capital Gain (LTCG). If you sell it after holding it for less than 3 years, it’s a Short-Term Capital Gain (STCG).

For STCG, you’ll need to pay tax according to the applicable slab rates, while for LTCG, the tax rate is 20% with the benefit of indexation.

Digital Gold: It is a hassle-free way to own gold without holding the physical metal. With digital gold, you can buy gold online for as little as one rupee, and an equal amount is securely stored in a protected vault.

You have the flexibility to sell the entire amount or just a part at any time, based on current market rates.

Tax Implications: Same as Physical Gold.

Gold ETFs: Gold ETFs, which stand for Exchange Traded Funds, function much like individual stocks and are traded on the stock exchange. As an investor, you can invest in gold and hold it electronically in your DEMAT account without the need to physically buy gold.

Tax Implications:

Tax on gold ETFs
Tax on gold ETFs1035×331 30.1 KB

Sovereign Gold Bonds (SGBs): SGBs are bonds issued by the Reserve Bank of India (RBI). They issue these bonds under the SGB scheme and provide an annual interest rate of 2.5%. The interest is paid semi-annually.

Tax Implications: The tax treatment is a little different here. There can be two scenarios: you can either redeem the bonds or sell them on the stock exchange.

  • SGBs have a lock-in of 8 years. If you redeem the bonds after maturity, i.e., 8 years, the capital gains will be exempt from tax.
  • If you decide to sell these bonds on the stock exchange, you’ll be subject to LTCG tax if the holding period is more than 12 months. For holdings of less than 12 months, STCG tax will be applied.
  • Additionally, the interest received will be taxable as “income from other sources” at the applicable slab rate.

As gold investments have changed from owning physical gold to digital and government-backed options, you now have a variety of choices to include gold in your portfolios, ultimately enhancing your financial security.

What are your thoughts? Share them below!

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Curious about the tax part of I purchase SGB in the secondary market. Will the LTCG/STCG be determined from the date of original issue of the SGB or from the day I buy it from another person?

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Hello @A_a

In case you buy the SGB from the secondary market, LTCG/STCG will be determined from the date you purchased the SGB. The seller has to pay CG on the tenure between original date of issue of SGB and the sell date.

For detailed understanding, you can refer our article as below:
Taxation on SGB

Hope, this helps.
Thank you.

1 Like
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Hi,

My mother is a housewife and lives with my father who is retired. She wants to sell her gold Jewellery/coins to be able to fund their lifestyle and daily expenses, so here are my questions:

  1. What are the tax implications? I assume sales proceeds will be taxed as LTCG at 12.5% as per latest notification?
  2. She does not have a PAN card, so i assume she will need one before she proceeds with the sale?
  3. She has no documents to prove the holding period, because she mostly bought them from local Jewellers starting from 1990s to early 2000s, in such a case, will she be charged 12.5% LTCG by default as there is no way of finding out when the gold was purchased unless there is some way that it can be idetified by looking at the jewellery physically? How do we find out the exact amount of capital gains in this situation?
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Hey @Mikedias

When selling gold jewelry that has been held for over 24 months, a long-term capital gains tax of 12.5% applies to the profit made from the sale. The taxable amount is calculated by subtracting the cost of acquisition (the purchase value) from the sale proceeds. To determine the cost of acquisition, you should use the available purchase invoices.

Additionally, she must apply for a PAN before proceeding with the sale, as she will need it to file her ITR and report the capital gains tax.

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Thank you for answering, however, she has no bills or receipts to prove the purchase price, in this case, does she have to pay 12.5% on the total sale value?

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Hey @Mikedias

In such a case, you can take the estimated market value of that year, or else you need to pay a 12.5% long-term capital gain tax on the entire sale value.