Gold investments carry different taxation rules depending on their form. If you’re planning to add some gold to your portfolio you should be aware of all these tax implications before you invest your hard-earned money into gold, gold bonds, ETFs, Digital Gold or Gold Savings Schemes.
How 5 Of The Popular Gold Investment Options Are Taxed In India
1. Sovereign Gold Bonds
Sovereign Gold Bonds are issued by the RBI on behalf of the Indian government. Sovereign Gold bonds have an interest rate of 2.5%. Holding period of 8 years with an exit option after 5 years. The minimum investment is 1 g and the maximum investment in a financial year is 4 kgs.
2. Digital Gold
Digital gold is a physical gold investment without making charges or other concerns like storage and security. For example, Digital gold investments on Cube are backed by actual physical gold by our partner, Safegold.
This gold will be stored in a safe vault under your name backed by Brinks. You can invest in fractional gold or as low as ₹1000. Speak to a wealth coach to know more.
3. Physical Gold
Physical gold can be bought in the form of jewellery, coins, and bars. The preferred way of buying physical gold is from a trustworthy jeweller. GST is also applicable @ 3% on the total value of gold bought.
4. Gold ETFs
Gold ETFs invest in physical gold. Gold ETFs track the price of actual gold. These ETFs can be bought and sold on the stock market. The minimum investment is 1 unit = 1 g.
5. Gold Savings Schemes
Here’s how Gold Savings Schemes work: You invest a certain amount of money each month over a period of time with a jeweller. Once the agreed tenure is complete, you can redeem your money in the form of gold from the same jeweller. Making charges will apply.
What Is The Taxation On Sovereign Gold Bonds?
Returns that you will receive after the maturity period of Sovereign Gold bonds (8 years) are tax exempt.
There’s an exit option after the 5th year. Any gains made during this period will be treated as LTCG taxed at 20% (+4% cess and any surcharge) with indexation benefits.
What Is The Taxation on Digital Gold Investments?
Digital gold investment returns are added to your gross total income and taxed as per your tax slab if you sell it before 3 years (Short term capital gains).
If you sell the digital gold investment after 3 years, you’ll have to pay a long term capital gains tax. LTCG on digital gold investments is 20% (+4% cess and any surcharge) with indexation benefits.
What Is The Taxation on Physical Gold Investments?
Physical gold is taxed in the same way as digital gold. STCG on physical gold is added to your gross total income and taxed as per your income tax slab. LTCG on physical gold is taxed at 20% (+4% cess and any surcharge) with indexation benefits.
Important: If you use the LTCG to buy residential property, you can claim a tax deduction under section 54F.
What Is The Taxation on Gold ETFs?
Since Gold ETFs basically invest in gold bullion, the taxation process is the same as physical gold. STCG on Gold ETFs are added to the gross total income and taxed as per the investor’s income tax slab. LTCG on Gold ETFs is taxed at 20% (+4% cess and any surcharge) with indexation benefits.
Fun fact: Did you know that you can invest in ETFs traded on the S&P 500 from India? Download the Cube Wealth app to know more.
What Is The Taxation on Gold Savings Schemes?
The taxation rules are the same as physical gold. You’ll also pay 3% GST and making charges. Other jeweller-specific taxes may also apply.
How Are Gold Derivatives Taxed?
Returns from gold derivatives can be claimed as business income. In such a case, your business can leverage the presumptive tax scheme under section 44AD if your turnover for that year is less than 2 crore.
How To Save Long-Term Capital Gains Tax On Gold Investments?
You can save tax on LTCG from your gold investments by:
- Re-investing the returns to buy a residential property. This ensures that you save tax under section 54F.
- Re-investing returns into certain bonds. This can help you save tax under section 54EC.
Tax On Gold Gifts and Gold Inheritance
You don’t have to pay tax on gold gifts if you’ve received it from a close relative. However, you’ll have to pay tax if you received a gold gift from anyone who is not your relative if the value is more than ₹50,000.
Gold investments carry a tax for STCG and LTCG. But there are ways to re-invest and save tax under section 54F and 54EC.
The most efficient way of investing in gold is through Digital gold using Cube. Download the Cube Wealth app or Speak to a wealth coach to know more.
Interested in more gold related blogs? Here you go:
1. Beginner’s Guide to Investing in Gold in India
2. 6 Best Ways To Invest In Gold In India
3. Are Gold Investments Good Or Bad?
4. What Are Gold ETFs?