Kolkata: Gold has hogged the limelight over the past few years due to a spectacular bull run. However, irrespective of whether you want to buy or sell gold, the question of applicability of taxes dog every step. Therefore, it is important to know what level of taxation are you exposed to in different situations. One obtain gold in different forms. The most traditional way is to buy gold jewellery. Then there are modern ways of investing in gold in the form of exchange traded funds or digital gold, or sovereign gold bonds and even bars and coins.
Investors are picking up a huge quantities of gold coins and bars. The safe haven demand for gold has increased over the past couple of years. The aggressive buying of the yellow metal by central banks to shift focus of forex reserves away from the US dollar is also fuelling the price rise of gold. And all this is triggering FOMO among investors.
Taxes is various situations
If a person buys physical gold or jewellery or digital gold, he/she has to pay 3% goods and services taxes. Now if one buys gold jewellery, making charge is a significant component of every item. A 5% GST is applicable on the making charge of gold jewelleries.
Another popular investment medium of gold is gold ETF, gold mutual funds and sovereign gold bonds. Investment in gold ETF is rising in a remarkable way. Sovereign gold bonds or SGBs have been discontinued but old ones are being redeemed gradually as the maturity dates are approaching. Significantly, no GST is applicable on the purchase of these forms of gold.
Imported gold: If one brings gold from abroad beyond the free baggage limit, a 6% custom duty is charged. Different quantities are permitted free of duty for male and female passengers.
Gold as gifts: The limit of tax free gifting is Rs 50,000. However, if the gold is gifted by specific relatives, no taxes are applicable.
Gold as inheritance: There is no inheritance tax if one gets gold bequeathed to an individual through a will.
Taxes on selling gold
Taxes are levied on proceeds from the sale of gold. Significantly, long term capital gains (LTCG) are not applied on gains from the sale of gold if the full amount is deployed to the purchase of a residential property within the a specified time period from the sale.
LTCG tax is applied on physical gold, jewellery and digital gold at 12.5% if the purchaser has held it for more than two years. But there are no indexation benefits. If held for less than two years, STCG will be slapped on the gains.
Gold ETF: Long term capital gains tax is applied at the same rate of 12.5% if the ETF investment is held for more than 12 months. Again no indexation benefits here too. For duration below 12 months, STCG comes into play.
Gold mutual funds: If the investment is held for more than two years, LTCG comes into force here at 12.5% and without indexation benefits. Sale before 24 months will attract STCG.
Sovereign gold bond: There is a diffrence in approach depending on whether the bonds have been purchased at the times of primary issuance or fom the secondary market. If the bonds bought at the times of primary issue and held till maturity they will be exempt from taxes. But they can be bought and sold in the secondary market. If one does so, STCG and LTCG will come into play depending on the period for which they are held.
For gold inherited: There is no inheritance tax in India. However, if this gold is sold one has to pay capital gains tax. And the term for which they are held will determine the nature of the tax. Significantly, the holding period will be considered from the time that the original owner bought it. The price at which he/she bought it will be considered as the m buying price to calculate the gains.
(Disclaimer: This article is only meant to provide information. News9 does not recommend buying or selling shares or subscriptions of any IPO, Mutual Funds, precious metals, commodity, REITs, InvITs and any form of alternative investment instruments and crypto assets.)