Income Tax: The good news is that tax-saving options exist. If you generate long-term capital gains from selling gold or silver, you can invest the proceeds in residential property and claim tax exemption under Section 54F of the Income Tax Act.
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Income Tax: In India, gold and silver are considered not just jewelry but also reliable investment instruments. However, while investing in them, as much attention is paid to prices, it is equally important to understand the tax rules. According to tax experts, the tax on gold and silver depends primarily on two factors: the type of investment and the holding period. If the investment is not redeemed in time, the investor could have to pay thousands of rupees in additional taxes.
Buying Jewelry is Expensive
According to Chartered Accountant Hitesh Jain, 3% GST is payable on purchasing physical gold, silver, or digital gold. If jewelry is purchased, a separate 5% GST is also levied on making charges. However, this GST cannot be adjusted against capital gains tax later. When an investor sells gold or silver, capital gains tax is applicable. If you have held gold or silver for more than 24 months, it will be considered a long-term capital gain and will be taxed at 12.5%. At the same time, if sold within 24 months, it will be considered as short term capital gain and tax will be levied as per your income tax slab.
These are the rules for gold bonds.
The rules are slightly different for Sovereign Gold Bond (SGB) investors. The 2.5% annual interest earned on these bonds is fully taxable. However, if the investor redeems the bond at maturity after 8 years, the capital gain is completely tax-free. If sold within 12 months, tax is levied as per the slab, while if sold after 12 months, 12.5% LTCG tax is payable.
The holding period also plays an important role in gold and silver ETFs and mutual funds. STCG is applicable for holding for 12 months, and LTCG is applicable for holding beyond 12 months. Tax experts warn that if an investor makes a profit of ₹2 lakh and sells the investment just a day before, they could have to pay an additional tax of approximately ₹36,400.
These are the rules for saving tax.
The good news is that tax-saving options are available. If long-term capital gains are generated from selling gold or silver, the proceeds can be invested in residential property to avail tax exemption under Section 54F of the Income Tax Act. Overall, experts believe that proper knowledge of tax rules and understanding of timing are crucial before investing in gold and silver, so that profits can be realized and tax burden can be minimized.
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