Income tax on gold: SGB vs gold ETF vs bodily gold. Know taxation guidelines right here

Gold is a vital asset class for investments. It affords you diversification in addition to helps you cut back volatility in your portfolio. Since gold is required on each social event within the household for all Indians, one ought to make investments round 10% to fifteen% of the general portfolio in gold.

There are numerous strategies for investing in gold. Traditionally our forefathers used to spend money on bodily gold both within the type of jewelry or gold bars/cash. Our era has extra choices together with digital modes like gold ETF, gold saving funds, and Sovereign Gold Funds to spend money on gold.

How the income on the sale of bodily gold and Gold ETF and items of Gold Saving Funds are taxed?

For tax functions, gold cash/bars and jewelry grow to be a long-term capital asset if held for 36 months or extra. Gold ETF and items of Gold Saving Funds purchased until 31 st March 2023 are handled and taxed like bodily gold and grow to be long-term capital belongings if held for 36 months or extra.

The income on sale after 36 months of holding are handled as long-term capital positive aspects and taxed at a flat 20% after making use of indexation. The income made inside 36 months are handled as short-term capital positive aspects and are taxed as short-term capital positive aspects on the slab charges relevant to you.

Profits on the sale/redemption of Gold ETFs or items of gold saving funds purchased after 31 st March 2013 will likely be taxed as quick capital positive aspects no matter the holding interval. So these will likely be taxed like your financial institution mounted deposits besides that the income will grow to be taxable solely once you promote or redeem your investments whereas, for curiosity on mounted deposits, you may have two choices to supply it for taxation. Either you’ll be able to supply it for taxation on an accrual foundation or on a receipt foundation once you truly obtain the curiosity on the maturity of the mounted deposits. The accrual or receipt foundation of accounting in respect of curiosity must be adopted persistently 12 months after 12 months.

Taxation of Sovereign Gold Bonds

Interest on Sovereign Gold Bonds is paid @ 2.50% on the difficulty worth and is credited to your checking account on a half-yearly foundation. The curiosity obtained on Sovereign Gold Bonds is totally taxable although no tax is deducted on the supply on the time of fee of the curiosity.

The Sovereign gold bonds are redeemed after 8 years of its subject date. The subscriber has the choice to go for early redemption on the curiosity fee date after the completion of 5 years. As far as income made on the time of redemption of Sovereign Gold Bonds are involved, the identical is totally tax-free in your fingers. This rule for income made on redemption applies, whether or not on the finish of the unique tenure of 8 years or on early redemption which is allowed after 5 years.

The exemption is relevant whether or not you acquired the SGB as an authentic subscriber or purchased from a secondary market. This exemption on redemption is offered solely to an Individual and doesn’t apply to different entities which are allowed to spend money on SGB.

If the bonds are transferred or offered, the income made on the sale of those bonds grow to be totally taxable as long-term or short-term relying on the holding interval. The holding interval for

SGB is 12 months to make their long-term capital belongings. If offered/transferred after 12 months, you’re entitled to say the good thing about indexation whereas computing the taxable long-term capital positive aspects. You even have the choice to pay a flat tax @ 10% of the revenue whether it is extra helpful than indexing the capital positive aspects. You can even declare an exemption underneath Section 54F for such long-term capital positive aspects by investing the proceeds in a residential home throughout the specified time interval.

Balwant Jain is a tax and funding skilled and might be reached at jainbalwant@gmail.com and on @jainbalwant on Twitter.

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Updated: 29 Jul 2023, 06:35 AM IST

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