The Union Budget 2026 has yet again put investors' focus on how gold and silver are taxed. The prices of precious metals have fluctuated significantly over the past few days, leaving many people wondering whether they should buy more of them or sell them off.
However, a major question that arises here is: How are profits from gold and silver taxed? Since these are not taxed as a single asset class, the amount of money an individual is required to pay as tax depends on various factors, such as the duration of possession, how the precious metal is being held and how they plan to sell or redeem it.
Union Budget 2026: Key Announcement For SGBs
The latest announcements made by Union Finance Minister Nirmala Sitharaman have further triggered anxiety among Sovereign Gold Bond (SGB) investors. This is due to a proposed rule change removing the capital gains exemption on SGBs that have been purchased from the secondary market.
Under the proposed changes, only original subscribers holding their SGBs to maturity will keep the full tax exemption. This means the second-hand buyers will lose it from April 1, 2026, onward.
In terms of SGBs, Sitharaman said in her Budget 2026 speech, "It is proposed to provide that the exemption from capital gains tax in respect of Sovereign Gold Bonds shall be available only where such bonds are subscribed to by an individual at the time of original issue and are held continuously until redemption on maturity".
She added, "It is also proposed to provide that this exemption applies uniformly to all issuances of Sovereign Gold Bonds by the Reserve Bank of India."
Earlier, anyone holding SGBs until maturity was allowed a tax-free exit on capital gains. Union Budget 2026 changes this and makes it for original subscribers, reports said.
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Budget 2026: Tax On SGBs
Operationally, there are no changes for the original subscribers. Those who have bought directly through RBI when the tranche got issued and hold the SGBs till maturity, the redemption remains fully exempt from tax. Also, early redemption via RBI windows retains the existing rules.
The 2.5% annual interest earned on SGBs will continue to be taxed as per the investor's applicable income-tax slab. The gains will be treated as short-term capital and taxed at slab rates if the investors sell SGBs within 12 months of purchase.
For SGBs sold after 12 months and before the maturity period of 8 years, long-term capital gains are taxed at 12.5% without indexation.
The Budget 2026 proposes the availability of a capital gains exemption at maturity to only original subscribers, making secondary buyers no longer qualified for the exemption.
The new rule starts on Apr. 1, 2026, for FY 2026 to 27 and beyond.
What About Physical Gold And Silver?
These are treated as captial assets. This includes jewellery, gold or silver coins, bars and other items.
If it is held for up to 24 months, STCG tax is applied at slab rates. If physical gold or silver is held beyond 24 months, LTCG tax is applied at 12.5% rate without indexation benefits.
Also, a 3% Goods and Services Tax (GST) is applied when buying physical gold, while another 5% GST is applied to the making charges.
Tax On Digital Gold And Silver
Tax on digital gold and silver will remain the same as the physical gold, except for the 5% GST that will not be applied on making charges because of its digital form.
Gold, Silver ETFs
If the holding period is up to 12 months, then gains get taxed at slab rates. But when the holding period is above 12 months, a 12.5% tax will be applied without indexation benefits. For tax purposes, gold and silver ETFs are treated as listed securities.
Gold And Silver Mutual Funds
These get taxed at slab rates if the holding period is up to 24 months. For more than 24 months, people have been required to pay tax at 12.5% without indexation.
Tax On Inherited Gold, Silver
When it comes to inheritance, India does not have an inheritance tax. But when inherited gold or silver is being sold, the capital gains are calculated using the original owner's purchase cost, while the holding period includes the time for which the asset was held by the previous owner.
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