How Different Gold Forms are Taxed in India

Purchasing gold and investing in the yellow metal has been largely considered auspicious, as far as the buying preferences in India are concerned. A number of families and women still choose gold over other conventional investment options such as bank fixed deposits (FD), recurring deposits (RD), real estate, etc. According to the present market structure in India, gold can be purchased in physical form such as jewellery, coins, biscuits, bars; tradable form such as gold exchange-traded funds (ETFs), gold mutual funds, sovereign gold bonds (SGB), etc. and digitally through mobile wallets, e-wallets.

The taxation on gold varies accordingly to the nature of gold purchased and the market from which it is bought. Gold is mostly purchased in the physical form such as gold jewellery, bars, coins, etc. However, many people who usually purchase gold in physical form are unaware of the tax rules applicable to the gold. Taxation on gold is different at the time of buying and selling.

Tax on physical gold 

After the implementation of nation-wide Goods and Services Tax (GST), a GST is levied on gold purchases at a rate of 3 per cent which is exclusive of the applicable gold rate and making charges of the jewellery maker. As per the prescribed guidelines by the Government of India, the tax on a physical form of gold is decided on the basis on the short-term and long term. If the gold is being sold within 3 years from the date of purchase then it is considered as short-term, while, gold sold after 3 years from the date of purchase is considered as long-term.

If the gold is sold before the completion of 3 years, then the capital gains from the sale will be added to the gross total income of an individual and are taxed at the applicable income tax rates according to the predefined tax slabs. If the gold is being sold after 3 years from the date of purchase, the capital gains are taxed at a rate of 20 per cent plus surcharge, and 4 per cent cess with the benefit of indexation.

Tax on tradable gold 

The taxation laws on the tradable gold form including gold mutual funds and gold exchange-traded funds (ETFs) is similar to that is applicable to the physical form of gold. On the other hand, taxation on sovereign gold bonds (SGBs) is different. According to the Reserve Bank of India (RBI), the capital gains tax arising on redemption of SGB to an individual has been exempted and the indexation benefits will be provided to long terms capital gains arising to any person on the transfer of bond.

Further, TDS is not applicable on the bond, RBI said, adding, it is the responsibility of the bondholder to comply with the tax laws. The interest earned on the bonds will be taxable as per the provisions of the Income-tax Act, 1961 (43 of 1961), RBI said further.

Tax on digital gold 
Tax on the digital form of gold is exactly similar to what is applicable to the physical form of gold. The buying and selling the digital form of gold has been recently introduced after the mobile wallet companies such as Paytm, PhonePe starting selling gold on their respective platforms in collaboration with MMTC.

Courtesy: Times Now