Sell ​​gold? Check tax expenditures first – Money News

By Neeraj Agarwala

As gold prices remain high, many investors want to redeem their shares in gold exchange-traded funds (ETFs), digital gold, sovereign gold bonds and even sell gold physical. It is important to understand the tax implications of holding and selling gold in its various forms.

Gold ETF, physical gold

Long term capital gains (LTCG) in gold ETFs is 12.5% ​​with a tax exemption limit of up to Rs 1.25 lakh in a financial year. However, unlike stocks (one year), the holding period to qualify as an LTCG gold ETF is two years. Short-term capital gains (STCG) on gold are taxed at the applicable flat rate. The indexation advantage is there for the sale of gold holdings.

Physical gold, which includes jewelry, coins and biscuits, remains the most widely held form of gold in India. Gains from physical gold, if held for more than 24 months, are classified as LTCG and taxed at 12.5%. For holdings of less than 24 months, gains are taxed according to the investor’s income tax bracket.

Digital gold

In recent years, digital gold has gained popularity as a convenient and secure alternative to physical gold. It allows investors to purchase gold online, which is then stored in secure vaults by the issuer. Despite its modern appeal, the tax treatment of digital gold mirrors that of physical gold. Gains from digital gold held for more than 24 months are taxed under LTCG at 12.5%, while holdings over shorter periods are subject to STCG tax depending on the investor’s income .

SGB ​​and gold derivatives

Sovereign gold bonds, however, have a unique advantage. Capital gains realized on redemption after maturity are completely exempt from tax. Interest earned at the rate of 2.5% per annum during the holding period is, however, taxed at the rates applicable to the investor.

Gold derivatives, traded on the commodities market, are not taxed as capital gains but as non-speculative business income. Investors can deduct their expenses from business income and the net profit is taxed as business income.

Non-resident Indians (NRIs) are allowed to invest in physical, digital and paper gold, except sovereign gold bonds. Tax rates for NRIs are the same as for Indian residents. However, TDS applies to gold ETFs or mutual fund redemptions.

Gold received as a gift is exempt from tax if received from a close relative or on the occasion of a marriage. However, in the event of a subsequent sale, capital gains tax will apply depending on the cost and the length of time the property was held by the previous owner.

Even though gold is a sustainable investment, its tax norms require careful consideration. Proper tax planning and compliance will help you maximize the benefits of your investments. Gold remains a symbol of security and wealth, but understanding its tax implications is the key to getting the most out of this timeless asset.

The author is a partner of Nangia & Co LLP. Contributions by Neetu Brahma.

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