Tax on Gold Investment in India: A Complete Guide for Investors

Gold has always held a special place in the hearts and portfolios of Indian investors. Beyond being a symbol of wealth and security, it is a time-tested investment avenue. However, many people overlook that gold investments are not tax-free. They are treated as capital assets under the Income Tax Act, and gains arising from their sale can be taxable.

Understanding gold taxation is crucial to avoid surprises during tax filing. This guide covers everything you need to know about gold taxation in India.

Types of Gold Investments in India

Each type of gold investment has slightly different tax implications:

• Physical Gold – Jewellery, coins, and bullion bars purchased from jewellers or banks.
  
• Gold ETFs (Exchange-Traded Funds) – Paper-based gold investments traded on stock exchanges.
  
• Gold Mutual Funds – Mutual fund schemes primarily investing in Gold ETFs.
  
• Sovereign Gold Bonds (SGBs) – Government securities issued by RBI offering 2.5% annual interest plus price appreciation.
  
• Digital Gold – ●     Bought via gold investment apps & platforms, where gold is stored in digital form and backed by physical gold.

How Gold is Taxed in India (General Rules)

Under the Income Tax Act, gold (except SGBs) is a capital asset. Updated rules effective April 1, 2025:

• Short-Term Capital Gains (STCG):
  Sold within 24 months → taxed at your applicable income tax slab.
  
• Long-Term Capital Gains (LTCG):
  Sold after 24 months → taxed at 12.5% without indexation.
  

⚠ Transitional provision: For gold purchased before July 2024, 20% with indexation may apply if lower.

Tax on Physical Gold

Physical gold includes jewellery, coins, and bars.

• STCG (<24 months): Taxed as per your slab rate.
  
• LTCG (≥24 months): Taxed at 12.5% without indexation.
  

Example:

• Buy gold in FY 2025-26 for ₹3,00,000
  
• Sell in FY 2027-28 for ₹5,00,000
  
• LTCG = ₹5,00,000 − ₹3,00,000 = ₹2,00,000
  
• LTCG Tax ≈ ₹26,000
  

Additional Point:

• Cash sale above ₹2 lakh requires quoting PAN to the jeweller.
  

Tax on Gold ETFs and Gold Mutual Funds

Aligned with physical gold rules:

• STCG (<24 months) → slab rate
  
• LTCG (≥24 months) → 12.5% without indexation
  
• Report under Capital Gains in ITR.
  

Holding in demat form makes tracking purchase dates and values easier.

Tax on Sovereign Gold Bonds (SGBs)

SGBs have unique tax benefits:

• Interest: 2.5% per year, taxable under Income from Other Sources.
  
• Capital Gains at maturity: Fully tax-exempt (after 8 years).
  
• Early sale in secondary market:
  
  • STCG (<24 months) → slab rate
    
  • LTCG (≥24 months) → 12.5% without indexation
    

SGBs remain one of the most tax-efficient gold investments.

Tax on Digital Gold

Digital gold follows physical gold rules:

• STCG (<24 months) → slab rate
  
• LTCG (≥24 months) → 12.5% without indexation
  
• Keep digital invoices for record-keeping.
  

Tax on Gold Received as Gift or Inheritance

• Gifts:
  
  • Taxable if value > ₹50,000 and received from non-relatives.
    
  • Gifts from specified relatives (parents, siblings, spouse, etc.) → fully exempt.
    
• Inheritance:
  
  • No tax at receipt.
    
  • On sale, LTCG threshold is 24 months, calculated using original owner’s purchase date/cost.
    

Reporting Gold in Your Income Tax Return (ITR)

• Capital gains → reported under “Capital Gains” in ITR-2 or ITR-3.
  
• SGB interest → Income from Other Sources.
  
• Maintain purchase invoices, bills, and digital statements.
  
• Consider transitional LTCG option for pre-July 2024 holdings.
  
• Non-disclosure can trigger scrutiny.
  

Legal Limits on Gold Holdings & PAN/Aadhaar Rules

• CBDT guidelines on reasonable holdings without proof during tax raids:
  
  • Married women → 500g
    
  • Unmarried women → 250g
    
  • Men → 100g
    
• No upper limit if proof of purchase/inheritance is available.
  
• PAN mandatory for cash purchases > ₹2 lakh.
  
• GST on purchases: 3%
  
• Customs duty on imported gold: 6%
  

Common Mistakes to Avoid

• Selling gold without proper invoices
  
• Forgetting to report capital gains in ITR
  
• Misapplying 36-month period instead of 24 months
  
• Assuming indexation applies
  
• Assuming SGB interest is tax-free
  

⚠ These mistakes can trigger tax notices, penalties, or interest charges.

Frequently Asked Questions (FAQs)

Q1. How much gold can I hold without paying tax?

• No tax on holding gold; tax applies only on capital gains.
  
• CBDT allows 500g (married women), 250g (unmarried women), 100g (men) without proof during raids.
  

Q2. Is there tax on selling old gold jewellery?

• Yes.
  
• STCG (<24 months) → slab rate
  
• LTCG (≥24 months) → 12.5% without indexation
  

Q3. Is inherited gold taxable?

• Not at inheritance.
  
• Capital gains apply on sale, using original purchase date/cost of previous owner.
  

Q4. Are Sovereign Gold Bonds completely tax-free?

• Interest → taxable
  
• Capital gains on redemption at maturity → fully exempt
  

Q5. Do I need to declare gold in ITR if I don’t sell it?

• No, only report gains from sale or SGB interest.

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