Priyanka Sambhav
The shiny yellow metal neither goes out of fashion nor out of demand. Gold is an all-time favourite investment whether you buy it in physical forms like a coin, bullion, jewellery or choose paper gold like gold exchange-traded funds (ETF), gold fund or sovereign gold bonds. But do you know how these various forms of gold purchases are taxed at your hands?
The basic thumb rule of tax on gold investment is based upon the time you have held the gold with you. Whether the capital gains arising from the gold is long term or short term will decide the threshold of the tax.
Tax on physical gold
Physical gold held for more than 3 years(36 months) attracts Long Term Capital Gain Tax(LTCG) at 20% plus 4% cess. On the other hand, if the gold is sold before 3 years then the investor has to pay a Short Term Capital Gain Tax(STCG) on it. For STCG tax, the return from the sale of gold is added to the gross total income and investor is taxed according to the applicable tax slab. Indexation benefit is available while calculating long term capital gain.
Tax on Paper gold
Investment in Gold ETFs and Gold Funds are catching up, and they are known as paper gold. They are opposite of physical gold wherein you get to see the gold only in paper form, but as far as tax is concerned, they are taxed identically like physical gold. If the time between the date of investment and date of redemption is less than 3 years, the gains will be treated as short term gains and will be added to investors income and taxed as per the applicable tax slab. If the same is held for three years and then sold it will be classified as long-term gains and will be taxed at 20% plus 4% cess with indexation benefits.
Tax on Sovereign Gold Bond
RBI’s Sovereign Gold Bond (SGB) are numero uno when it comes to returns and to an extent it lightens the tax burden too. Investors earn return linked to gold price momentum plus an annual 2.5% interest, and here comes the best part it saves you from capital gains tax if held till maturity. The tenor of SGB is eight-year and after the end of eight years when the bond is redeemed, it’s not taxable at all. Though the interest earned from SGB is taxed. The interest income is clubbed with the investor’s income and taxed according to the applicable tax slab. If an investor wants to take an early exit, then be ready to pay the tax on capital gains. SGB sold before maturity but after holding it for 3 years will attract 20% LTCG tax plus cess and if sold before 3 years then STCG tax as per the slab of the investor.
Hope you have got a better understanding of how various forms of gold are taxed and this helps you in making an informed decision. Happy investing.
