Taxation of Gold Under explained: this guide covers what Taxation of Gold Under means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
1. Physical Gold: LTCG at 12.5% After Budget 2024
Physical gold (coins, bars, jewellery) is a capital asset under ITA 2025. Capital gains treatment:
- Held more than 24 months: LTCG at 12.5% without indexation (Budget 2024 removed indexation)
- Held 24 months or less: STCG at slab rate
- For gold purchased before 23 July 2024: grandfathering option — choose between 12.5% without indexation OR 20% with indexation (whichever gives lower tax)
2. Sovereign Gold Bond (SGB): Best Tax Treatment
SGB is the most tax-efficient way to hold gold:
- Maturity proceeds (after 8 years): FULLY EXEMPT from capital gains tax — Schedule II, ITA 2025
- Interest income: 2.5% p.a. — taxable at slab rate with TDS
- Premature redemption (after 5 years, through RBI window): capital gains tax applies at 12.5% (LTCG if held 12+ months)
- Secondary market sale on stock exchange: LTCG at 12.5% after 12 months; STCG at slab rate within 12 months
3. Gold ETF: Slab Rate from April 2023
Gold ETFs (Exchange Traded Funds tracking gold prices) are classified as non-equity funds under ITA 2025 — because they invest in physical gold, not equity. Finance Act 2023 changed: all gains from gold ETFs taxable at slab rate regardless of holding period. No LTCG benefit even after 10 years. This made gold ETFs less attractive from tax perspective vs SGBs.
4. Digital Gold: Same as Physical
Digital gold (bought through apps like Google Pay, Paytm etc.) is taxed the same as physical gold — 12.5% LTCG after 24 months (or grandfathering option), slab rate for STCG. The holding period and cost of acquisition are tracked from the purchase date on the digital gold platform.
5. Gold Mutual Funds (FoF)
Gold mutual funds (Fund of Funds investing in gold ETFs) are also classified as non-equity funds — taxed at slab rate from April 2023. No indexation or LTCG benefit. Same treatment as gold ETFs.
6. Inherited Gold: Not Taxable
Inherited gold is not taxable on receipt — inheritance is not a transfer under ITA 2025. However, the heir must use the original cost (to the previous owner) as cost of acquisition when they eventually sell. If the gold was acquired before 1 April 2001, cost can be taken as FMV on 1 April 2001.
7. Gold Comparison Summary
| Gold Type | LTCG Rate | Holding for LTCG | Tax on Income |
|---|---|---|---|
| Physical gold | 12.5% | 24 months | N/A |
| SGB (held to maturity 8 years) | Nil (EXEMPT) | 8 years | 2.5% interest — slab |
| SGB (sold on exchange) | 12.5% | 12 months | Interest — slab |
| Gold ETF | Slab rate | No LTCG benefit | N/A |
| Gold mutual fund | Slab rate | No LTCG benefit | N/A |
8. Why TaxClue
Gold investment tax treatment varies significantly by instrument — SGB is clearly best from a tax standpoint. TaxClue advises on gold taxation and ensures correct reporting in ITR. Contact us under ITA 2025.