Kolkata: Gold prices have been on a decline over the past few weeks. According to World Gold Council data, the price of gold has come down by as much as 7.23%
in October alone and the triggers were a firm US dollar, rising inflation concerns and shifting interest rate expectations. When buying gold in any form, it is useful to be aware of the taxes that one has to face when selling them for gains.
There are several ways of buying gold — purchasing jewellery, investing in gold ETF and buying units of gold mutual funds. The rules that are now applicable came into effect from July 23, 2024. The rules stipulate that LTCG (long-term capital gains) on gold ETFs, metallic gold and mutual funds are taxed at a flat rate of 12.5%. Earlier one used to get indexation benefits but it will no longer be applicable now. SGB, or Sovereign Gold Bonds, have been discontinued by the Centre. If pone wants to sale them before maturity, one has to pay LTCG at the rate of 12.5%.
Tax on selling gold
If you buy gold, you have to pay 3% GST on the value of gold and 5% GST on the making charge (if it is in the form of jewellery). But if you sell gold, you may have to pay income tax. Indexation benefits are no longer available on the sale of gold and the rule came into effect on July 23, 2024. Gold can face STCG (short term capital gains) or LTCG (long term capital gains) tax depending on the period held. If one holds the gold for 24 months or a shorter time period, STCG will be levied. It is charged at the slab rate of the seller’s income. But if the gold is held for more than 2 years, one has to pay LTCG at the rate of 12.5%.
How are Gold and Gold mutual fund gains taxed
Gold exchange-traded funds or ETFs are a dematerialised way of investing in gold. This instrument carries no traditional hassles of safe-keep or worries about the quality of the metal bought. One can invest in gold ETFs or gold mutual funds. If the holding period of gold ETFs or gold mutual funds is less than or equal to 12 months, one has to pay STCG on the gains. But should the holding period exceed 12 months, LTCG will be applicable on the gains. And in this case too, there is no indexation benefit for the seller.
Tax on gains on Sovereign Gold Bonds
SGBs or Sovereign Gold Bonds are securities issued by the Centre. The bonds are issued by the RBI on behalf of the central government. New bonds are not issued any longer on account of the surging price of the metal. The bonds have a maturity period of eight years. Those who buy these bonds are also entitled to an interest of 2.5% on the amount invested. The real profit is, however, the appreciation in the price of the metal on which the redemption price depends.
The point to remember is that if one holds the bonds till maturity one does not need to pay income tax. But if the bond is sold through the secondary market, STCG or LTCG is applicable depending upon the period of holding. For less than or equal to 12 months of holding, STCG will be effective. But if the bonds are held for more than 12 months, the tax will be levied at 12.5% without any indexation benefit.
(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.)
