Tax on Gold Selling | Capital gains tax is applicable when gold and silver are sold. Higher tax within 24 months, lower after that. The same rules apply to SGB, ETF, and digital gold.
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Tax on Gold: Did you buy gold on Dhanteras? Did you buy jewelry during the Diwali season? Or did you invest in gold when the price of gold was low before that? You have to pay tax not only when you buy gold, but also when you sell it. Physical gold, ETF, digital gold… it doesn’t matter. If you sell gold, you will have to pay tax on the profits you make. As the prices of gold and silver are increasing drastically, the number of people investing in them is also increasing. But many people are not clear about how the taxes on this income will be. Whether you buy gold or silver, it does not matter whether it is in the form of jewelry, coins or bars, or digital or paper form. The profits made from it will have to be taxed. Gold prices have increased by up to 60% during the year. Silver prices have almost doubled. With this increase, investors have made good profits. But you have to pay tax on these profits too. And know in detail how these taxes will be.
Tax on physical gold and silver
If you sell gold or silver in the form of jewelry, coins, or bars, the profit is considered a capital gain. This tax depends on how long you held the gold.
Short-Term Capital Gain (STCG): If you sell gold or silver within a period of less than 24 months, the gain is considered short-term and taxed as per your income tax slab rate.
Long-term capital gain (LTCG): If you sell gold or silver after 24 months, there will be a tax of 12.5% on that gain. But if you bought gold before July 23, 2024, you can get the benefit of indexation. You will have to pay only 20% tax. Indexation means adjusting the purchase price according to inflation.
For example, if you buy gold jewellery for Rs. 5 lakh and sell it for Rs. 6 lakh within 2 years, the profit will be Rs. 1 lakh. This comes under short-term gain. So you have to pay tax as per your income tax slab. For example, if you are in 30% slab, you have to pay tax of Rs. 30,000.
If you sell the same jewellery after 24 months, it will be a long-term gain. If you bought it before July 23, 2024, the taxable gain will be less due to indexation. For example, if the purchase price is Rs. 5.25 lakh after indexation, the taxable gain will be Rs. 74,470. You will have to pay 20% tax on this, which is Rs. 14,894. Gold purchased after July 23, 2024 will have a tax of 12.5%. There will be no indexation benefit. Overall, the tax on gold depends on how long you hold it. This means more tax on short-term investments, less tax on long-term investments.
Tax on gold and silver ETFs
Gold or silver exchange-traded funds (ETFs) are treated like physical gold for tax purposes. If sold within 24 months, it is considered a short-term capital gain and taxed as per the income tax slab. If sold after 24 months, it is considered a long-term gain and taxed at 12.5%.
Tax on Sovereign Gold Bonds (SGBs)
Sovereign Gold Bonds issued by the Reserve Bank of India (RBI) have a special tax regime. They earn 2.5% interest every year. This is considered as “other income” and taxed as per the income tax slab. If you hold the bond for 8 years and take it to maturity, there is no tax on the gain. But if you sell it after 5 years, there is a long-term capital gains tax of 12.5%.
Tax on digital gold and silver
These days, many people are buying digital gold or digital silver through fintech apps. The tax on these is the same as physical gold. If sold within 24 months, it is considered as short-term capital gain and taxed as per the income tax slab. If sold after 24 months, it is considered as long-term gain and taxed at 12.5%.
TDS Rules
If you sell gold or silver worth more than Rs. 50 lakhs in a financial year, the buyer (for example, a jeweler) will deduct 1% TDS. From July 1, 2021, if you buy gold worth more than Rs. 10 lakhs in cash, 1% TDS or TCS will be applicable. PAN and Aadhaar details are mandatory.
Gold and silver received as a gift or inheritance
If the value of gold or silver received as a gift exceeds Rs. 50,000 in a financial year, it is taxable unless it is received from relatives or in cases like marriage. There is no tax on inherited gold and silver at the time of inheritance. But when you sell it later, the capital gains tax is levied on the purchase price by the previous owner.
Although gold and silver investments are safe, they can only be profitable if you know the tax rules and invest in them. Long-term investments with proper planning can reduce the tax burden.
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