Gold is considered one of the most precious metals to purchase during the auspicious festival of Diwali. People purchase this yellow metal in both physical and digital forms. Gold can be purchased in the form of jewelry, gold coins, and bars. In addition to physical gold, you also have alternatives such as sovereign gold bonds, and gold ETFs. Just like other investments, gold investment also comes with tax obligations. Although the taxation rules for digital gold and physical gold are similar, sovereign gold bonds have different regulations in place.
Tax is applied to gold in both long-term capital gains (LTCG) and short-term capital gains (STCG). The LTCG on gold has been decreased from 20% to 12.5% in Budget 2024. This implies that after keeping gold for two years and selling it, a 12.5% LTCG tax must be paid on the profit.
Nevertheless, Budget 2024 has eliminated the option of indexation for gold investments, meaning you will no longer receive indexation advantages on LTCG. Additionally, the duration for holding short-term capital gains (STCG) on physical gold has been shortened from three years to two years.
If you purchase a gold ETF after March 31, 2025, and sell it a year later, you must pay a 12.5% tax on the profits without the advantage of indexation. The profits drawn from gold ETF will be included in your taxable income and subject to taxation based on the relevant slab rates, regardless of how long you hold the investment.
As for Sovereign Gold Bonds, Selling an SGB to the Reserve Bank of India (RBI) upon maturity does not incur STCG or LTCG tax. There have been no modifications to this regulation following Budget 2024. If the bond is sold within three years, any profits will be included in the taxable income and subject to income tax at the relevant slab rates.
Gains from purchasing gold mutual funds between April 1, 2023, and March 31, 2025, will be included in taxable income and taxed based on the income tax slab, irrespective of how long the funds were held.
Receiving gold as a gift from family or relatives could result in an exemption from income tax. However, if you receive gold valued at over Rs 50,000 as a gift from someone else, you will be required to pay tax on it as it will be treated as income derived from alternative sources.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. Times Now Digital suggests its readers/audience to consult their financial advisors before making any money related decisions.)