Want To Buy Gold This Diwali? Check Out The Tax Implications On Your Purchase

As per the new norms, if you purchase a gold ETF after March 31, 2025 and offload it after 12 months, you will have to pay 12.5 per cent tax on the gains made without indexation benefit

Buying gold during Diwali is a tradition followed by many Hindu households. The festival of lights is considered an auspicious period for making big purchases and buying gold during the time marks prosperity and wealth in Indian culture.

There are multiple types of options available to invest in gold, such as jewellery, coins and biscuits, gold exchange-traded funds (ETFs), digital gold, sovereign gold bonds, etc. However, gold investments also have certain tax implications attached to them. Let’s take a look at these tax norms so that you can make an informed financial decision in the festive season.

Tax Implications On Gold Jewellery

Gold is taxed under long term capital gain (LTCG) and short term capital gains (STCG). The latest Budget cut down the LTCG on gold from 20 per cen to 12.5 per cent. Therefore, if you possess gold for two years and then sell it, you will have to pay a LTCG tax of 12.5 per cent on the profit you made. At the same time, the Budget also removed indexation on gold investments, so you are no longer entitled to recieve indexation benefits on LTCG. The holding period for STCG on physical gold has also been slashed from three years to two years, reported The Financial Express.

Gold ETF

If you acquire a gold ETF, the gains for the same will be added to your taxable income. Therefore, you will be charged a tax as per the applicable slab rates, regardless of the holding period. As per the new norms, if you purchase a gold ETF after March 31, 2025 and offload it after 12 months, you will have to pay 12.5 per cent tax on the gains made without indexation benefit.

Tax Norms For Gold Mutual Funds

The capital gains tax rules state that for gold mutual fund units purchased between April 1, 2023 and March 31, 2025, the gains will be added to the taxable income and then tax will be deducted based on the individual’s income tax slab. This will be applicable regardless of the holding period.

Sovereign gold bonds

SGBs don’t attract any STCG or LTCG on them if sold to the Reserve Bank of India (RBI) on maturity. No changes have been made in this rule after Budget 2024. However, if you sell the bond within three years, the gain shall be added to the taxable income and taxed as per the income tax slabs.