new Delhi. Gold prices in India have now lost their lead after reaching a high of 56,200 in August. Currently, gold prices are hovering around Rs 50,000 per 10 grams. Physical gold traders are stocking up given the current festive season. They feel that demand will improve in the festive season.
There are four ways to shop for gold in India. First, the purchase of physical gold in the form of jewelery and coins. Second, gold mutual funds and exchange traded funds (ETFs). Third, Digital Gold and fourth, Sovereign Gold Bond (SGB). When customers sell gold, it is taxed, depending on the form of gold. Let us know in detail.
Taxes on Jewelry and Coins
Most gold is purchased in India in the form of jewelery and coins. The tax on the sale of this gold depends on how long you have kept the gold with you. If you sell gold within three years of purchase, then that profit is considered short term. It is treated in the same way as capital gains in debt funds. This short-term capital gain is added to the buyer’s total income and is taxed according to his income tax slab. If this gold is sold after three years of purchase, then that profit is considered as long term profit and it is charged 20% long term capital gains tax.
Tax on Gold ETFs and Gold Mutual Funds
Talking about Gold ETFs, they invest in physical gold to track the physical price of gold and gold mutual funds invest in gold ETFs. Capital gains from both gold ETFs and gold mutual funds are taxable in the same way as physical gold.
Tax on digital gold
Online shopping through apps is a new way to buy gold. Many banks, mobile wallets and brokerage companies partner with MMTC-PAMP or SafeGold to sell gold through apps. Capital gains received from them are taxed like physical gold or gold ETFs.
Tax on Sovereign Gold Bonds
Sovereign Gold Bonds (SGB) are government securities denominated in gold and provide an option to hold physical gold. Investors buy it at issue price and the bonds are redeemed when they mature. These bonds are issued by the Reserve Bank of India and the Government of India. These bonds have a maturity period of eight years. There is also an option to opt out of the fifth year. Capital gains on maturity in SGB are completely tax free. However, if you exit the secondary market, then tax is levied just like physical gold.
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