Union Budget 2023: E-Gold Receipts Not to Attract Capital Gain [Read Finance Bill]

The Finance Minister Nirmala Sitharaman in the Union Budget 2023-24 proposed that the conversion of physical gold to Electronic Gold receipts (EGR)and vice versa is not to be treated as a transfer and excluded from the purview of the capital gains.

It was proposed that the cost of acquisition of the EGR for computing tax should be the cost of gold. Further, the holding period for capital gains tax would include the period for which gold was held by the assessee before its conversion into EGR.

Depository gold receipts, or EGRs, are traded on the stock exchanges where the investors purchase gold in a dematerialized form and are given gold receipts.

Provision for the Conversion of gold to EGR is another significant change proposed by the Union Budget 2023.  Another vital change made was that any transfer of a capital asset, being physical gold to the Electronic Gold Receipt issued by a Vault Manager or such Electronic Gold Receipt to physical gold shall not be considered a 'transfer'.

Clause (42A) of the said section defines “short-term capital asset” and Explanation 1 of the said clause provides for determining the period for which any capital asset is held by the assessee.

It was proposed to insert a new sub-clause (hi) in clause (i) to Explanation 1 of the said clause so as to provide that in the case of a capital asset, being Electronic Gold Receipt or gold being a capital asset, the holding period for the purpose of capital gain shall include the period for which the gold or Electronic Gold Receipt, was held by the assessee prior to conversion into Electronic Gold Receipt or gold.

To Read the full text of the Finance Bill 2023 CLICK HERE
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