Gold’s price has experienced a significant surge, rising over 50% annually and achieving a 30% CAGR over three years, according to MCX data. In India, the festive season traditionally sees high demand for gold, both for jewellery and investment purposes.While gold investments in any form require income tax payment upon sale, except for SGBs at maturity, distinct tax regulations apply to different forms of gold investments.
Taxation guidelines
Purchase of gold attracts 3% GST, whilst making charges incur 5% GST. Although buying gold is not subject to income tax, selling it necessitates tax payment.According to Milin Bakhai, Partner, Direct Tax, N. A. Shah Associates LLP, quoted by Economic Times, gold sale taxation has evolved recently. “The tax treatment of gains on the sale of physical gold and other forms has undergone significant changes with the amendments brought in by the Finance Act 2024 from July 23 2024,” he said.A notable modification removes indexation benefits for physical gold, gold ETFs, gold mutual funds, and SGBs traded in secondary markets.Physical gold taxationHoldings under 24 months attract STCG tax at slab rates. Beyond 24 months, a flat 12.5% tax applies without indexation benefits.ETFs and Gold Mutual Fund taxation:These high-purity gold investments face STCG tax at slab rates for holdings under 12 months. Longer holdings attract 12.5% flat tax without indexation.
| Forms of Gold Investments | Before 23 July 2024 | After 23 July 2024 |
| Physical Gold | STCG ≤ 36 months → taxed at slab rate LTCG > 36 months → 20% with indexation |
STCG ≤ 24 months → taxed at slab rate LTCG > 24 months → 12.5% flat, no indexation |
| Gold ETFs and Gold Mutual Funds | STCG ≤ 36 months → slab rate LTCG > 36 months → 20% with indexation |
STCG ≤ 12 months → slab rate LTCG > 12 months → 12.5% flat, no indexation |
| Sovereign Gold Bonds held till maturity | No Capital gains | No capital gains |
| Sovereign Gold Bonds sold in secondary market before maturity through stock exchange | STCG ≤ 12 months → taxed at slab rate LTCG > 12 months → 20% with indexation or 10% without indexation whichever is more beneficial |
STCG ≤ 12 months → taxed at slab rate LTCG > 12 months → 12.5% flat, no indexation |
[As per Milin Bakhai, quoted by ET]SGB taxation guidelinesSGBs, issued by RBI as government securities, offer 999 purity gold investment with an eight-year maturity. These instruments provide 2.5% annual interest alongside potential gold appreciation benefits. Early redemption is available after five years, with exchange trading possible for demat holdings.Maturity proceeds remain tax-exempt. However, secondary market sales before maturity incur STCG at slab rates for holdings under 12 months, whilst longer holdings attract 12.5% tax without indexation benefits.
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