Gold at all-time highs: How your gold investments are taxed, from jewellery to ETFs and SGBs

With gold prices touching all-time highs and the festive season in full swing, many Indians are eyeing the yellow metal, whether for tradition, investment, or gifting.

But before you rush to buy or sell, it is important to note that your gold returns aren’t tax-free.

Just like other investment tools, be it stocks, equity MFs, real estate, or gold too come with their own set of tax rules that can affect your actual gains.

Here is how different forms of gold investments are taxed

When you sell physical gold (jewellery, coins, bars), any profit you make is treated as capital gain.

Short-term gain (sold within 2 years): The profit is added to your income and taxed at your regular income tax slab rate.

Long-term gain (sold after 2 years): This is taxed at a flat 12.5% (plus surcharge and cess).

"Under the new rules (effective from July 23, 2024), the indexation benefit, which earlier allowed you to adjust your purchase price for inflation, is no longer available," said Abhishek Soni, CEO & Co-founder, Tax2win.

If you prefer not to hold physical gold, gold exchange traded funds (ETFs) and gold mutual funds offer the ideal solution, providing exposure to the gold price without the concerns of storage, purity, or theft.

"If you sell within 1 year, the profit is short-term and taxed as per your slab rate. If you sell after 1 year, it’s long-term, and the gain is taxed at 12.5% without indexation," said Soni.

SGBs, backed by the Government of India, are among the best gold investments for tax planning. They provide a two-fold benefit: you receive a 2.5% fixed annual interest (taxed normally according to your slab).

Any profit from the gold price appreciation (capital gain) received at the bond's maturity is entirely tax-free.

"If you sell the bonds on the stock exchange before maturity, capital gains will be taxable, short-term or long-term depending on how long you held them," added Soni.

Many fintech platforms now allow you to buy digital gold, where the company holds the physical gold on your behalf. But for tax purposes, it’s treated exactly like owning physical gold, noted Soni.

Meanwhile, according to a report by Tata Mutual Fund, while demand for traditional gold jewellery in India is expected to ease, investment interest in gold through options like Gold ETFs and digital gold is on the rise, especially as the gold rally gains momentum.