Gold has a special place in Indian culture. It is a symbol of prosperity, thus linked to Goddess Lakshmi. There is a tradition of buying gold on many festivals in India, among which Akshaya Tritiya and Dhanteras are prominent. Dhanteras, also called Dhantrayodashi, marks the beginning of the 5-day Diwali festival, which will be celebrated on October 31 this year. People buy gold and other precious metals on Dhanteras, which is being celebrated today across the country.
You can buy gold in the form of jewellery, gold coins and bars. Other than physical gold, you have options like digital gold, sovereign gold bonds and gold ETFs. Like other assets, gold investment also attracts tax liability. While taxation rule is almost the same for both digital gold and physical gold, rules are different for sovereign gold bonds.
Also read: Silver prices up over 42% since last Diwali, seen breaching Rs 1,20,000 per kg soon! What’s driving the rally
Tax rules on gold jewellery
Gold is taxed under long term capital gain (LTCG) and short term capital gain (STCG). Budget 2024 has reduced the LTCG on gold from 20% to 12.5%. This means that if you hold gold for two years and then sell it, you will have to pay 12.5% LTCG tax on the profit. However, Budget 2024 has abolished indexation on gold investments, so you will no longer get indexation benefits on LTCG. Also, the holding period of STCG for physical gold has been reduced from three years to two years.
Tax on gold mutual funds
The capital gains tax rules have changed after Budget 2024. As per the new rule, the holding period for short-term capital gains will be reduced, but the tax rate will not change. For units of gold mutual funds bought between April 1, 2023 and March 31, 2025, the gains will be added to taxable income and taxed as per the income tax slab, regardless of the holding period.
Gold ETF
If you buy a gold ETF, the gains will be added to taxable income and taxed at applicable slab rates, irrespective of the holding period. Note that if you buy a gold ETF after March 31, 2025 and sell it after 12 months, you will have to pay 12.5% tax on the gains without indexation benefit.
Sovereign gold bonds
When you sell a sovereign gold bond (SGB) to the Reserve Bank of India (RBI) on maturity,
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