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
Gold has always been more than just a precious metal in India. It’s a symbol of emotion, tradition, and, perhaps most importantly, security. But beyond its sentimental value, gold has consistently proven its worth in financial terms. Over the past year, gold has delivered an impressive 60% return, proving that it isn’t just a safe haven, but also a reliable growth asset.
In the past, 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:
1. 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 2 years, it’s considered a Long-Term Capital Gain (LTCG). If you sell it after holding it for less than 2 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 12.5% without the benefit of indexation.
2. 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.
3. Gold ETFs: Gold ETFs trade like individual stocks on the stock exchanges, allowing you to invest in gold and hold it electronically in your DEMAT account without the need to physically buy gold.
Tax implications:
4. 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 2.50%, which 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 exchanges.
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Redemption on maturity: SGBs come with an 8-year lock-in period. If you redeem the bonds after this period (i.e., after 8 years), the capital gains will be tax-exempt.
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Selling in the secondary markets: If you sell the bonds on the stock exchange, the tax treatment depends on the holding period.
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Additionally, the annual 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!
