In India, gold is not just a precious metal, but also one of the most commonly held forms of wealth. However, many are unaware that each form of gold is taxed differently. The rules differ depending on when you buy the asset, holding period, and time of sale. From physical gold to digital platforms and even inherited assets, the Income Tax Department applies GST at the time of purchase and capital gains tax at the time of sale.
The holding period, type of gold and even the source of ownership impact how much tax you eventually pay. Besides a few additional compliance considerations, the rules remain largely similar for NRIs as well. Here is everything you need to know if you are looking to invest in gold or pass it on as wealth.
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Taxation rules on gold in India
Gold sold within 24 months is taxed as short-term capital gains at your slab rate. This applies to physical, digital and paper investments. Gold held over 24 months is taxed at 12.5%, down from 20%, with no indexation. You can reinvest long-term capital gains from gold into a residential house to claim exemption under Sections 54F and 54EC.
What are the rules for NRIs?
Non-resident Indians can invest in physical, digital and paper gold in India as per RBI and the Foreign Exchange Management Act (FEMA) norms. However, they cannot invest in Sovereign Gold Bonds.
Short-term capital gains apply if you sell within 24 months. Gains are taxed at your income tax slab rate. On the other hand, long-term capital gains apply for holdings over 24 months. The rate is 12.5%, the same as for Indian residents.
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Income tax on inherited gold
Gold received as a gift or inheritance from family members is exempt from tax. Wedding gifts are also tax-free under Section 56(2) of the Income Tax Act. However, if you receive gold worth over Rs 50,000 from non-relatives on any occasion other than your wedding, it is taxable. It must be declared under ‘Income from other sources' in your ITR.
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