Income Tax on Gold: Income Tax Implications Of Gold Investments

Income Tax on Gold

Gold is one of the most common investments in India. For ages, Indians have trusted in the value and aesthetics of gold. Due to market economic changes over the last year, gold prices have risen at an unprecedented rate. Gold investments are considered safe during these times of uncertainty. Investing in gold does not mean only investing in physical gold. Digital gold, paper gold, etc are also other options. Before investing in gold, it is important that you should be aware of the income tax implications of gold investments.

Tax On Physical Gold

Physical gold investments include gold ornaments, gold coins, gold biscuits, gold savings schemes, etc. If you want to sell physical gold, you are subjected to a 20% income tax rate, along with a 4% cess on long-term capital gains. Selling gold within 3 years after buying is considered as short-term gains and above 3 as long-term gains. Long-term gains are taxed at a rate of 20.8 percent (including cess) with indexation benefits. While selling gold, no TDS rates are applicable. If jewelry worth more than Rs. 2 lakh is bought and paid in cash, then you will be charged 1% TDS. When you buy gold jewelry, you have to pay 3% GST on the value of the gold along with any applicable making costs.

Tax On Digital Gold

Digital gold investments recently gained popularity and it is handled the same as physical gold. Short-term gains on digital gold assets are not strictly taxable. Long-term gains have a 20% income tax rate on the whole amount, along with a surcharge and a 4% cess with indexation benefits. The income tax amount an investor has to pay depends on the holding period of digital gold. Recently, mobile wallets like Google Pay, Paytm, and PhonePe, have partnered with SafeGold or MMTC-PAMP to sell gold for as little as Rs. 1.

Tax On Paper Gold

Gold ETFs or Exchange Traded Funds allow you to invest in gold without actually owning any of the actual gold. The gold ETF value depends on the current gold price. So, any gains from the gold ETFs are considered the same as gains from selling physical gold. Gold ETFs and mutual fund profits have the same income tax rates as physical gold. Short-term investors do not have to include these gains during their income tax filing. Those earnings from paper gold investments are applied to their other earnings, and they are subjected to taxation according to the relevant tax slabs.

Tax On Sovereign Gold Bond

You will receive 2.5 percent a year in interest if you invest in sovereign gold bonds. Interest earnings fall under other sources of income and are charged accordingly. After investing in SGB for eight years, any profits you gain from it are tax-free. There will be no capital gains taxes on the benefit you receive if you keep the bonds until they mature (8 years). In that way, you can make some long-term capital gains while redeeming the gold bonds. TDS is not applicable to these bonds.

Tax On Gold As Gifts

You don’t have to pay income tax for any physical gold received as a gift from close relatives such as parents, siblings, or children. If the amount of the donation reaches above Rs. 50000, and it is not a gift from your close relative, you are liable to pay taxes under the category – Income from other sources.

Like any other market including cryptocurrencies like bitcoin, gold is also subjected to uncertainty and volatility. The gold price fluctuation depends on a variety of global economic factors. Understand the risks before investing in gold. Gold investments are the best option if you are looking to diversify your investment portfolio.

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