Gold ETF Gains in India: How Much Tax Will NRIs Pay? Key Rules Explained
NRIs pay slab-rate tax on Gold ETF gains if sold within 12 months and 12.5% tax if sold after 12 months, with no Rs 1.25 lakh exemption.
Gold has a strong place in Indian savings. NRIs also use gold as a hedge. Many NRIs prefer Gold ETFs because they feel simple. No locker is needed. No making charges exist. Units sit in a demat account. A sale takes minutes on the exchange.
Tax is the part that creates stress. Tax rules for gold investments changed in recent years. The rule set also differs across asset types. This article explains how India taxes Indian Gold ETF gains for NRIs. It covers the post-July 23, 2024 capital gains framework and the rule shift that matters from April 1, 2025.
What is a Gold ETF for tax purposes?
An Indian Gold ETF is a listed mutual fund unit that tracks gold prices. It trades on NSE or BSE. The Income-tax Act treats the unit as a capital asset. Profit on sale is capital gains.
Capital gains fall into two buckets.
- Short-term capital gains (STCG)
- Long-term capital gains (LTCG)
The bucket depends on the holding period, unless a special deeming rule forces a result.
The big dates you must track
Three dates drive most outcomes.
Date 1: April 1, 2023
Section 50AA introduced a deeming rule for certain mutual funds bought on or after this date. It matters for some funds even if you hold them for a long time.
Date 2: July 23, 2024
India changed the LTCG framework for many assets from this date. For many long-term assets taxed under Section 112, the rate became 12.5% without indexation for transfers on or after this date.
Date 3: April 1, 2025
From this date, the definition used for “Specified Mutual Fund” in Section 50AA becomes narrower. It covers funds with more than 65% in debt and money market instruments, plus certain feeder structures. This shift removes many non-debt funds from the 50AA net. Gold ETFs sit in this discussion because they are not debt funds in that sense.
Tax rules for NRIs selling Gold ETFs from April 1, 2025
This section covers the rule set most readers want.
A) Holding period test
For listed units, the long-term threshold is more than 12 months. So:
- Hold for 12 months or less → STCG
- Hold for more than 12 months → LTCG
B) STCG tax rate (12 months or less)
STCG on Gold ETFs is taxed at slab rate. It does not fall under the special equity STCG section used for listed equity with STT conditions. So the tax rate is your slab rate as per the NRI tax table, plus surcharge and cess where relevant.
C) LTCG tax rate (more than 12 months)
LTCG on Gold ETFs is taxed under Section 112 at:
- 12.5%
- No indexation
- Plus surcharge and health and education cess
This 12.5% rate links to the transfer date. It applies for transfers on or after July 23, 2024.
The Rs 1.25 lakh LTCG exemption does not cover Gold ETFs
A common error comes from mixing rules for equity with rules for gold.
The Rs 1.25 lakh annual exemption is tied to Section 112A. Section 112A covers:
- Listed equity shares
- Equity-oriented mutual fund units
- Units of business trusts
Gold ETFs do not fit this list. So this exemption does not apply to Gold ETF LTCG.
If you book Rs. 2 lakh of LTCG on a Gold ETF, the full Rs. 2 lakh enters the Section 112 tax base. The Rs. 1.25 lakh carve-out is for Section 112A assets.
What about sales before April 1, 2025?
This part matters if you bought after April 1, 2023 and sold in the earlier window.
Section 50AA said that gains on “Specified Mutual Fund” units acquired on or after April 1, 2023 are treated as short-term even after a long holding period. That rule created a shock for many investors in debt funds.
From April 1, 2025, the “Specified Mutual Fund” definition becomes debt-heavy. That is the change that reduces 50AA reach.
If your Gold ETF sale sits in FY 2024-25, check the 50AA position with your adviser. Your facts matter. Your fund factsheet also matters. Use the scheme category and portfolio break-up to map your case.
TDS and NRIs: what happens in real life
Tax payment is not the same as tax deduction.
Exchange sale (NSE or BSE)
When you sell a Gold ETF on the exchange, your broker settles the trade. Many investors see no separate TDS line item for such trades. Still, tax liability exists. You must report gains in the return and pay self-assessment tax if needed.
Off-exchange redemption
If a redemption happens with an AMC, the payer deals with an NRI payment. Section 195 governs withholding on payments to non-residents. This route often triggers TDS mechanics.
If TDS happens, you must match it with your Form 26AS and claim credit in your return.
DTAA: can an NRI avoid tax in India on Gold ETF gains?
A DTAA is a treaty. The treaty text controls the result.
Many Indian treaties give India taxing rights on capital gains from Indian securities. Some treaties allocate rights to the country of residence for certain assets. The outcome varies by Article 13 language.
You must follow three rules if you seek DTAA benefit.
- You must hold a Tax Residency Certificate (TRC) from your country.
- You must submit Form 10F where needed.
- You must compute tax under both treaty and domestic law and use the lower tax outcome, as the Act permits.
Even under DTAA, India-side TDS can happen. In that case, you must file a return and claim a refund. This is a cash-flow issue, not a final tax issue.
Practical checklist for NRIs before selling Gold ETFs
- Confirm your holding period in days and months.
- Confirm sale date because July 23, 2024 changes the LTCG framework for Section 112 assets.
- Confirm if Section 50AA enters based on purchase date and scheme type.
- Keep documents: contract note, demat statement, and capital gains report.
- Check DTAA papers if you plan a treaty claim: TRC and Form 10F.
- Plan for return filing if tax credit or refund is part of the path.
Takeaway
For an NRI, Gold ETF gains in India follow clean rules from April 1, 2025.
- STCG (12 months or less) is taxed at slab rate.
- LTCG (more than 12 months) is taxed at 12.5% without indexation under Section 112, plus surcharge and cess.
- The Rs. 1.25 lakh LTCG exemption does not cover Gold ETFs.
- DTAA relief requires treaty text review and proper forms.
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