gold and silver
In India, gold and silver are not only considered jewelery but also a reliable means of investment. But while investing in these, as much attention is paid to the prices, it is equally important to understand the tax rules. According to tax experts, the tax on gold and silver mainly depends on two things. Type of investment and holding period. If the investment is not redeemed at the right time, the investor may have to pay thousands of rupees in additional tax.
Buying jewelery is expensive
According to chartered accountant Hitesh Jain, 3% GST has to be paid on purchasing physical gold, silver or digital gold. If jewelery is purchased, a separate 5% GST is also levied on the making charges. However, this GST cannot be adjusted later against capital gains tax. When an investor sells gold or silver, capital gains tax is applicable on it. If you have held gold and silver for more than 24 months, then it will be considered as long term capital gain and 12.5% tax will be charged on it. At the same time, selling in less than 24 months will be considered as short term capital gain and tax will be levied as per your income tax slab.
These are the rules of gold bond
The rules are slightly different for Sovereign Gold Bond (SGB) investors. The 2.5% annual interest received on these is fully taxable. But if the investor redeems the bond on maturity of 8 years, then the capital gain is completely tax free. If it is sold within 12 months, then tax is levied as per the slab, whereas if sold after 12 months, 12.5% LTCG tax has to be paid.
Holding period also plays an important role on Gold and Silver ETFs and Mutual Funds. STCG is applicable for holding up to 12 months and LTCG is applicable for more than 12 months. Tax experts warn that if an investor makes a profit of Rs 2 lakh and sells the investment only a day before, he may have to pay additional tax of around Rs 36,400.
These rules are to save tax
It is a matter of relief that there are options to save tax. If there is long term capital gain by selling gold or silver, then tax exemption can be availed by investing that amount in residential property under Section 54F of the Income Tax Act. Overall, experts believe that before investing in gold and silver, it is very important to have correct knowledge of tax rules and understanding of timing, so that profits remain in hand and the tax burden can be reduced.