Diwali, the festival of wealth and joy, was celebrated with great pomp across the country. New purchases are considered auspicious on Diwali. Buying gold in this is also very auspicious. At the same time, most people also buy gold to invest. Gold is cheaper by about 5,000 rupees this year compared to last year. In such a situation, people fiercely bought gold this time. But let us tell you that according to the Income Tax Law of India, you have to pay taxes on the purchase and sale of gold.
Generally, there are 4 main ways to invest in gold, including physical gold, gold mutual funds or ETFs, digital gold, and sovereign gold bonds. If you have also bought gold on the occasion of this Diwali, you must also take into account the corresponding tax liability.
tax on gold bought from goldsmiths
Indians generally buy gold by going to the goldsmith’s shop. This gold is in the form of gold jewelry, bars or coins. Let us tell you that you have to pay 3% GST on physical gold purchased from the goldsmith on a pucca invoice. On the other hand, the tax liability on the sale of physical gold by the customer depends on how long they have been kept with you. If the gold is sold within three years from the purchase date, the gain will be treated as a short-term capital gain and it will be added to your annual income and taxed according to the income tax slab. applicable. On the other hand, if you decide to sell gold after three years, it will be treated as a long-term capital gain and will incur a 20 percent tax. Along with the indexing benefits, a 4% cut-off and surcharge will also apply.
digital gold oe gold
India is currently going through a digital revolution. In such situation, the trend of digital gold is also increasing in the country. Many banks, mobile wallets, and brokerages offer digital gold in partnership with MMTC-PAMP or SafeGold. In the event of a digital gold sale, long-term capital gains are taxed at the same rate as physical gold or gold / gold ETF mutual funds. That is, 20% tax plus rate and surcharge. But if the digital gold is with the customer for a period of less than 3 years, then the return on its sale is not directly taxed.
Sovereign Gold Bonds
Investors earn 2.5 percent annual interest on sovereign gold bonds, which is added to the taxpayer’s income from other sources. The Sovereign Gold Bond is tax-free after the 8-year maturity. But in case of premature departure, different tax rates apply on bond returns. Generally, the lock-in period of the Sovereign Gold Bond is 5 years. After the end of this period and before the expiration period, the returns from the sale of gold bonds are held in Long Term Capital Gains. Under this, a 20 percent tax and a 4 percent tax plus a surcharge apply.
Gold mutual funds, gold ETFs
Gold Exchange Traded Fund invests your investments in physical gold. In such a situation, gold purchased in this way is taxed like physical gold. Speaking of gold mutual funds, invest in gold ETFs.