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Gold and silver fund taxation: A guide to using tax-loss harvesting
4 min read | Updated on March 02, 2026, 15:18 IST
SUMMARY
As the financial year draws to a close, experts suggest that it’s a great time to review your portfolio and use tax loss harvesting strategically.
Gold and silver funds are taxed depending on the holding period. | Image: Shutterstock.
What is tax loss harvesting?
Tax loss harvesting, or TLH, as experts call it, is the practice of selling an investment at a loss to offset gains elsewhere in your portfolio. This reduces your taxable capital gains in the current year. After selling at a loss, you can buy back a similar asset to maintain market exposure. This lowers your taxable income, so you pay less tax.
Taxation of gold and silver funds in India
Gold and silver funds are taxed depending on the holding period. Before diving into tax loss harvesting, let's understand how these funds are taxed:
Short-term gains: If you hold gold, silver ETFs for less than 12 months, or gold mutual funds for less than 24 months, gains are added to your income and taxed at your normal income tax rate.
Long-term gains: If held beyond the long-term threshold, gains are taxed at 12.5% without indexation.
| Instrument Type | Short-Term Holding Period | Long-Term Holding Period |
|---|---|---|
| Gold/Silver ETFs | < 12 months | ≥ 12 months |
| Gold/Silver Mutual Fund FoFs | < 24 months | ≥ 24 months |
"STCG is taxed at your normal tax slab rate when computing income under the head “Capital gains” as per Section 48/Section 111 framework of the Act. If you hold beyond the long-term threshold (more than 12 months for ETFs, more than 24 months for mutual fund FoFs), the gains are long-term capital gains (LTCG) and taxed at 12.5% under Section 112 without indexation," said Abhishek Soni, CEO & Co-founder, Tax2win.
| Capital Gain Type | When Applies | Tax Rate | Tax Section |
|---|---|---|---|
| Short-Term Capital Gains (STCG) | ETF held < 12 months; FoF held < 24 months | Taxed at normal slab rate | Section 48 / 111 |
| Long-Term Capital Gains (LTCG) | ETF ≥ 12 months; FoF ≥ 24 months | 12.5% (without indexation) | Section 112 |
How loss harvesting improves post-tax returns
| Before TLH | After TLH |
|---|---|
| Total taxable gain = ₹3,00,000 | Total taxable gain = ₹2,00,000 |
| Higher tax paid | Lower tax paid |
| Lower post-tax returns | Higher post-tax returns |
"Under the new Act’s carry-forward and set-off rules in Section 111(1) and (2), short-term capital losses can be set off against both STCG and LTCG, while long-term capital losses can be set off only against LTCG. These losses can also be carried forward for up to eight years to offset future gains," said Abhishek Soni.
As the financial year draws to a close, experts suggest that it’s a great time to review your portfolio and use tax harvesting strategically.
Disclaimer: This article is written purely for informational purposes and should not be considered investment advice from Upstox. Investors should do their own research or consult a registered financial advisor before making investment decisions.
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