FAQ on Gold

Q1: What is Capital Gains Tax on the sale of gold and precious metals in India?

Capital Gains Tax is the tax imposed on the profit earned from the sale of gold, silver, or other precious metals. In India, the taxation depends on how long you hold the asset before selling it. This tax applies when you sell gold jewelry, coins, bars, or even gold exchange-traded funds (ETFs).

Q2: What are Short-Term Capital Gains (STCG) and Long-Term Capital Gains (LTCG) for gold?

If you sell your gold within 36 months (3 years) of purchase, any profit earned is considered short-term capital gain. STCG is added to your income and taxed according to the applicable income tax slab.

If you sell your gold after 36 months, the profit is classified as long-term capital gain. LTCG is taxed at a flat rate of 12.5% without indexation benefit and at 20% with indexation benefit, which adjusts the purchase price for inflation.

Q3: How is indexation applied for LTCG on gold?

Indexation adjusts the purchase price of gold for inflation using the Cost Inflation Index (CII), which lowers the taxable capital gain. This means the cost of acquisition is increased in proportion to inflation, reducing the effective taxable profit.

Suppose you bought gold for ₹1,00,000 in 2015 and sold it in 2023 for ₹2,00,000. Without indexation, your capital gain would be ₹1,00,000. But with indexation, the original cost could be adjusted to a higher value, say ₹1,50,000, meaning your taxable gain would only be ₹50,000.

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Q4: Is there any TDS (Tax Deducted at Source) on the sale of gold?

Generally, no TDS is deducted when you sell gold. However, if you sell gold to a jeweler for over ₹2 lakh in cash, TDS provisions may apply under certain circumstances due to anti-money laundering regulations.

Q5:Are capital gains from the sale of gold taxed differently for individuals and businesses?

Yes, individuals and businesses face different tax treatments. For individuals STCG is taxed based on the income tax slab, and LTCG is taxed at 20% with indexation. For businesses dealing in gold, the profits from the sale of gold form part of their business income, which is taxed according to their total income at the regular corporate or individual tax rates.

Q6: What if the gold is inherited? Is capital gains tax still applicable?

Yes, capital gains tax still applies when you sell inherited gold. However, there is no tax at the time of inheritance. The capital gain will be calculated based on the cost to the previous owner (the one who bequeathed it), and the holding period of the previous owner is also considered for determining whether the gain is short-term or long-term.

Q7: What about the sale of gold ETFs or sovereign gold bonds?

Gains from the sale of gold ETFs are taxed similarly to physical gold. If it was purchased before March 31, 2023, and sold after 36 months, the gains will be taxed at 20% with indexation benefits.

If purchased between April 1, 2023 and March 31, 2025, the gains will be added to the taxable income and taxed at the applicable income tax slab rates. If bought after March 31, 2025, and sold after 12 months, a 12.5% tax will be payable on the gains without the indexation benefits.

Sovereign Gold Bonds (SGBs) are securities issued by RBI and If held until maturity, capital gains on redemption of SGBs are exempt from tax as per section 47(viic) of the Income Tax Act, 1961 (ITA). However, if sold before maturity in the secondary market, the same LTCG/STCG rules as physical gold apply.

Q8: How can I save on Capital Gains Tax when selling gold?

There are certain methods you can employ to save on capital gains tax when selling gold.

For long-term holdings, using indexation reduces the taxable profit. Under Section 54EC of the tax statute, you can invest capital gains in certain government bonds (like NHAI or REC bonds) to claim an exemption. The maximum investment limit is ₹50 lakhs. If you’ve incurred losses in other investments, you can set off these losses against your capital gains from gold to reduce tax liability.

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Q9: Are there any exemptions for capital gains from gold?

There are no direct exemptions for capital gains on gold. However, if you reinvest the gains into certain assets, like residential property (under Sections 54F and 54GB of the tax legislature), or into capital gain bonds (Section 54EC of the tax statute), you can claim exemption under the specific conditions mentioned in these sections.

Q10: How is the holding period calculated for gold inherited or received as a gift?

For inherited or gifted gold, the holding period is calculated from the date when the original owner (the person from whom you inherited or received the gold) acquired it. This helps in determining whether the capital gain is short-term or long-term. For example, if your grandfather purchased gold in 2010 and you inherited it in 2020, the holding period will be considered from 2010.

Q11: Are there any tax implications when receiving gold as a gift?

Receiving gold as a gift is generally tax-free provided the value of the gold does not exceed ₹50,000 in a financial year from non-relatives. If the value exceeds this limit, the entire value is taxable as "Income from Other Sources" under the income tax act. However, gifts received from specified relatives (parents, siblings, spouses, etc.) are exempt from taxation, regardless of the value.

Q12: How is capital gains tax applied when selling jewelry?

The sale of jewelry, whether made of gold or other precious metals like silver or platinum, follows the same capital gains tax rules as gold. The key difference might lie in the valuation of the jewelry at the time of sale, as the making charges and other factors could affect the selling price. However, the holding period and the tax treatment for STCG or LTCG remain the same.

Q13: What if I exchange old gold for new gold? Is there a capital gains tax?

Yes, even when you exchange old gold for new gold, it is considered a transfer under the ITA. The difference between the market value of the old gold at the time of exchange and its purchase price will be subject to capital gains tax. In this case, the tax liability arises because it’s seen as a sale of the old gold.

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Q14: Does wealth tax apply to gold in India?

India no longer has Wealth Tax, as it was abolished in the 2015 Union Budget. Earlier, individuals had to pay wealth tax on gold and other precious metals if their total wealth exceeded a certain threshold, but this is no longer the case.

Q15:How does tax treatment work for gold purchased outside India?

Gold purchased outside India is still subject to Indian capital gains tax rules when sold within the country. The cost of acquisition will be converted into Indian rupees at the exchange rate applicable on the date of purchase. If the gold was held for over 36 months, LTCG applies with indexation benefits. You may also need to declare such assets if held overseas under the Foreign Exchange Management Act (FEMA) and Black Money Act 2005.

Q16: How is digital gold taxed in India?

Digital gold. such as that bought through platforms like Paytm, Google Pay, or other fintech apps, is taxed the same as physical gold. Short-term and long-term capital gains rules apply, based on the holding period. While purchasing and holding digital gold is convenient, the tax implications are identical to owning physical gold.

Q17: What are the penalties for non-disclosure of gold sales?

Failing to disclose income from the sale of gold, such as capital gains, can attract penalties under the ITA. If the omission is detected, the taxpayer may face penalties, interest on unpaid taxes, and in some cases, prosecution. The penalty could range from 50% to 200% of the tax evaded. To avoid this, it’s essential to report all gold sales and related capital gains.

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