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Taxes on Gold in India. How Much Gold Can I Hold?
Gold has been a treasured asset for centuries due to its cultural and traditional importance. People have always considered gold a good investment because its value usually increases over time. In the fiscal year 2021-22, India imported gold worth $46.14 billion, which was 33.34% more than the previous year.
Given how much gold is consumed in India, it’s important to understand the tax implications when buying or selling it. Let’s explore the taxes associated with gold.
Taxes on Buying Physical Gold
Customs Duty
Most gold in India is imported, and the government charges customs duty on it. Recently, this duty was reduced from 12.5% to 10%.
Agriculture Infrastructure Development Cess (AIDC)
A 5% cess is added to the gold imports, contributing to the country’s development.
Goods and Services Tax (GST)
When you buy gold, a 3% GST is applied on its price, which is calculated after adding customs duty and cess.
Making Charges and GST:
When gold is crafted into jewellery or coins, there are making charges, which attract an additional 5% GST.
Tax Deducted at Source (TDS):
If you buy physical gold worth more than ₹1 lakh, a 1% TDS is deducted, which you can adjust against your annual tax liability.
Taxes on Selling Physical Gold
Short-term Capital Gains Tax (STCG)
If you sell gold within three years of purchase, the profit is added to your income and taxed according to your income tax slab.
Long-term Capital Gains Tax (LTCG)
If you sell gold after holding it for more than three years, a 20% tax applies. This can be reduced by adjusting for inflation.
GST on Jewellery Exchange:
When you exchange old gold jewellery for new, GST is generally not charged on the gold itself, only on the making charges.
Taxes on Digital Gold
Digital gold is bought online and stored securely in vaults. The tax treatment is similar to physical gold, with a 20.8% tax on long-term capital gains.
Sovereign Gold Bonds (SGBs):
These government-backed bonds are a safe investment. If held until maturity (8 years), any capital gains are exempt from tax. However, interest earned on these bonds is taxable.
Gold Mutual Funds and ETFs:
These are taxed similarly to physical gold, with 20.8% on long-term gains.
Gold Derivatives
These involve trading contracts based on gold prices and are taxed like commodity trading.
Tax on Gold Gifts or Inheritance
If you receive gold as a gift or inheritance from close family members, it’s generally exempt from tax. However, gifts worth more than ₹50,000 from non-relatives are taxable as income.
Tax for NRIs
Non-Resident Indians (NRIs) are also subject to the same tax rates as residents when buying or selling gold, except they cannot invest in Sovereign Gold Bonds.
Conclusion
Gold can be a smart investment, but it’s essential to be aware of the taxes involved. Whether you invest in physical gold, digital gold, or gold bonds, understanding the tax implications will help you make informed decisions. Always consult a tax advisor for personalized advice.
FAQs
How much gold is tax-exempt?
Gold received as a gift or inheritance from close family members is exempt from tax. However, there are no specific exemptions when purchasing gold.
How is the sale of gold jewellery taxed?
If sold within 3 years, it’s taxed according to your income slab. If sold after 3 years, a 20.8% tax applies.
Is digital gold more expensive than physical gold?
Both have different costs. Physical gold might involve customs duty and making charges, while digital gold may have management fees.
How much gold can you keep at home with proof?
Married women can keep up to 500 grams, unmarried women up to 250 grams, and men up to 100 grams without risk of confiscation.
How much gold is allowed without tax?
There’s no limit on how much gold you can hold, but you must be able to explain the source of income used to buy it.
What is meant by a tax on gold?
It includes customs duty, GST, income tax on gifts, and capital gains tax on sales.
Can you buy and sell gold without GST?
GST is usually applied on making charges, but the actual gold may be exempt.
Is it possible to sell gold without paying taxes?
Holding gold for more than 3 years before selling might qualify for tax benefits.
How to buy gold without tax?
Completely avoiding tax is difficult, but you can explore options like Sovereign Gold Bonds or gold ETFs for potential tax benefits.
