Gold is a safe haven asset globally – and it’s also the traditional go-to savings and investment bet in India. Gold prices have been rising unprecedentedly over the last 18 months and investors are rushing to buy the yellow metal amidst global economic and geopolitical uncertainty.Investment in gold can happen through various avenues: physical pure gold like coins or bars, gold jewellery, or even through digital forms and investment avenues like exchange trade funds (ETFs), mutual funds, and sovereign gold bonds.While buying gold is seen as an obvious choice, especially in India with its cultural aspects, it is important to understand that your gold holdings are subject to tax at the time of sale or even purchase – and this includes the jewellery you inherit!If you intend to buy or sell gold — whether in physical form, digitally, or through other investment avenues — it is important to understand the tax implications applicable to each category.
Tax on sale of gold
The rules for short-term and long-term capital gains on gold sales were revised after 23 July 2024. In addition, under Section 54F of the Income Tax Act, long-term capital gains arising from the sale of gold can be exempt from tax if the full sale consideration is invested in the purchase of a residential property within the specified timelines.Physical gold, gold jewellery, and digital gold: If any of these gold-related assets are held by you for more than 24 months, the gains that you make are treated as long-term capital gains – hence facing a 12.5% tax without indexation. If you sell these gold assets within two years of acquiring them, then the gains are classified as short-term and taxed according to your applicable income tax slab.Gold ETFs: Long-term capital gains is applicable if the ETF units are held for over 12 months, implying a tax of 12.5% without indexation. If you sell them within 12 months, the gains are treated as short-term and added to the total income, attracting tax as per slab rates, according to an ET report.Gold mutual funds: The gains that you make from gold MFs qualify as long-term if your holding period is over 24 months and are taxed at 12.5% without indexation. However, if the redemption is made before completing the 2 year time frame, it is treated as short-term gains and taxed at applicable slab rates.Sovereign gold bonds: Before Budget 2026, redemption of SGBs was tax-free if the bonds were taken during primary issuance or from the secondary market and redeemed with the Reserve Bank of India at or before maturity. However, as per the revised rules after the Budget, only Sovereign Gold Bonds which are purchased at primary issuance and held continuously until maturity remain exempt from taxes. Sovereign Gold Bonds bought or sold in the secondary market, or sold before maturity, will now be taxed as either short-term or long-term capital gains depending on the holding duration.Inherited gold: It’s important to understand that although inheritance itself does not attract tax in India, capital gains tax becomes applicable when this inherited gold is sold by you. The acquisition cost and holding period are calculated from the date the original owner acquired the asset. If the total holding period is more than 24 months, the long-term capital gains tax of 12.5% without indexation is applicable, while for shorter holding periods the taxation is applicable at income tax slab rates.
Tax on purchase of gold
Physical gold, gold jewellery, and digital gold: A goods and services tax (GST) of 3% is charged on purchases across these categories. In the case of gold jewellery, an additional 5% GST is applied on making charges.Gold ETFs, gold mutual funds, and sovereign gold bonds (SGBs): No GST is imposed at the time of purchase for these investment options.Imported gold: Gold brought into the country attracts a customs duty of 6%.Inherited gold: Gold received through inheritance, whether as jewellery or in any other form, does not attract inheritance tax.Gifted gold: Gold that you receive as a gift from specified relatives is exempt from tax. However, if this gold is gifted to you by non-relatives and its value is over Rs 50,000 in a financial year, it becomes taxable under the head “income from other sources.”
