Taxation on Sale of Gold in India
Gold is one of the most preferred investment options in India, available in multiple forms such as physical gold, Gold ETFs, Sovereign Gold Bonds (SGBs), digital gold, and gold mutual funds. Each form has a different tax treatment under the Income-tax Act. This article explains the taxation on sale of gold in a simple and professional manner.
1. Physical Gold (Jewellery, Coins & Bars)
Physical gold includes jewellery, coins, and bars. Tax is applicable at the time of sale based on the holding period.
• Short-Term Capital Gain (STCG): If sold within 24 months, gains are taxed as per the individual’s income tax slab.
• Long-Term Capital Gain (LTCG): If held for more than 24 months, gains are taxed at 12.5% without indexation.
• GST paid at the time of purchase is not refundable and forms part of the cost.
2. Gold Exchange Traded Funds (ETFs)
Gold ETFs are paper gold investments traded on stock exchanges and backed by physical gold.
• STCG: Units sold within 12 months are taxed as per income tax slab rates.
• LTCG: Units sold after 12 months are taxed at 12.5% without indexation.
3. Sovereign Gold Bonds (SGBs)
Sovereign Gold Bonds are issued by the RBI on behalf of the Government of India and are considered the most tax-efficient form of gold investment.
• If held till maturity (8 years): Capital gains are completely tax-free.
• If sold on stock exchange:
– Within 12 months: Taxed at slab rates.
– After 12 months: Taxed at 12.5% without indexation.
• Interest earned (around 2.5% annually) is taxable as per slab rates.
4. Digital Gold & Gold Mutual Funds
Digital gold and gold mutual funds offer convenience and flexibility but follow similar tax rules.
• STCG: If sold within 24 months, gains are taxed as per income tax slab.
• LTCG: If sold after 24 months, gains are taxed at 12.5% without indexation.
Conclusion:
From a tax perspective, Sovereign Gold Bonds are the most efficient option for long-term investors, while Gold ETFs and mutual funds provide liquidity with moderate taxation. Physical gold, though culturally significant, is the least tax-efficient due to GST and higher holding period requirements.