Income tax on Gold: Gold has been the center of attraction for a long time. It is not only bought as jewelery but is also considered a strong medium of investment. Gold ornaments are also an investment because they are bought considering that money is being secured for bad times. In such a situation, it is important to know how much tax liability is incurred when we sell gold in any form that we keep with us. Tax liability is made on this because the money you will get from the sale is your income. Knowing this is also important because by understanding tax liability, you will be able to think of a good option to invest in gold for yourself.
4 ways to buy gold
There are four ways to buy or invest in gold in the country – Physical Gold, Gold Mutual Fund or ETF, Digital Gold and Sovereign Gold Bonds. Let’s see, one by one, how tax liability will be made on them.
Tax on profit in investment in physical gold
The most common method of investing in gold is jewelery or coins. The tax liability on this depends on how long you have kept them with you. It has the same taxation rules as debt funds. If gold is sold within three years from the date of purchase, then any profit made from it will be considered as short term gain and tax will be calculated on the basis of the applicable income tax slab, assuming it is your income. Conversely, if you decide to sell it after three years, then considering it as a long-term capital gain, a tax liability of 20 percent will be made on it.
Tax on profits from Gold Mutual Funds, Gold ETFs
Gold Exchange Traded Fund (ETF) invests your capital in physical gold and it fluctuates according to the price of gold. Talking about gold mutual funds, it invests in gold ETFs. Gold ETFs and gold mutual funds have a tax liability similar to physical gold.
Tax liability on a digital gold
Digital gold is also a way to invest in gold. Many banks, mobile wallets and brokerage companies tie-up with MMTC-PAMP or SafeGold and sell gold through their app. The tax on capital gains made from them is similar to physical gold or gold mutual funds or gold ETFs.
Tax liability on sovereign gold bonds
These are government securities which are issued by the central bank on the RBI government. Their price is measured equal to one gram of gold. Investors have to buy it online or by cash and a Sovereign Gold Bond of equal value is issued to them. It is redeemed as cash at maturity. Their maturity period is eight years and if redeemed on this period, there will be no tax on the gains made by it.
However, if you redeem it before maturity (only after five years of investment), it is taxed like physical gold or gold mutual funds or gold ETFs. Apart from this, an annual interest of 2.5 percent is also available, which is taxable according to your tax slab. Although TDS is not deducted.