Understanding Income Tax on Gold in India

Gold isn’t just a metal in India; it’s a tradition, an investment, and an emotional security. Whether you are purchasing jewellery, investing in digital gold, or availing a Gold Loan , it’s crucial to understand how taxation applies to gold in India. In this blog, you will learn everything you need to know about gold taxation – what is taxed, what isn’t, and how you can potentially reduce your tax outgo. Read on!

What is Tax on Gold in India

When dealing with gold, whether buying, selling, or gifting, it attracts various types of taxes under Indian law. The most common ones include:

• Income Tax: Levied when you earn profit from selling gold.
• GST: Charged on the purchase of physical gold.

Example:

If you buy gold worth ₹2 lakh and sell it after 3 years for ₹2.5 lakh, the ₹50,000 gain will be taxed as long-term capital gain (LTCG).

Are There Any Tax-free Gold in India

While gold is generally taxable, there are certain scenarios where it may be partially or completely tax-free.

Tax on Different Forms of Gold

Each form of gold – physical, digital, or paper-based comes with a different tax implication.

1. Physical Gold (Jewellery, Coins, Bars)

• Purchase: 3% GST
• Sale after 3 years: LTCG at 20% with indexation
• Sale before 3 years: STCG added to income, taxed as per your slab

2. Digital Gold

• Taxed like physical gold
• No GST on purchase
• Gains are taxed as STCG or LTCG based on the holding period

3. Sovereign Gold Bonds (SGBs)

• Interest of 2.5% p.a. is taxable
• No capital gains tax if held till maturity (8 years)

4. Gold ETFs and Mutual Funds

• Same taxation as debt mutual funds
• STCG: Taxed at slab rate
• LTCG: 20% with indexation after 3 years

GST and Gold Purchases

The Goods and Services Tax (GST) plays a significant role in determining the final cost of gold in India. When you purchase gold jewellery or bullion, you are not just paying for the metal; you are also paying applicable taxes that can add to the total expense. Here’s a closer look at how GST affects different components of gold transactions:

GST Rates Applicable on Gold

How it works in practice: 

Let’s say you are buying a gold necklace weighing 20 grams, with gold priced at ₹6,000 per gram. The charges for making are ₹5,000, billed separately.

Breakup: 

• Gold cost = 20g x ₹6,000 = ₹1,20,000
• GST on gold (3%) = ₹3,600
• Making charges = ₹5,000
• GST on making charges (5%) = ₹250
• Total invoice amount = ₹1,28,850

So, while the base cost is ₹1,25,000, taxes push the final price up to ₹3,850. Understanding this breakdown helps you plan your purchases more efficiently.

How to Declare Gold in Income Tax Returns

You don’t need to declare gold in your ITR unless:

• You sell gold and make a capital gain
• You are asked to disclose assets over a certain net worth (in ITR-3 or ITR-4)
• You gift or receive gold above the prescribed limits

Tips to Minimise Tax on Gold in India

Some planning can help reduce your tax burden legally. Here’s how:

• Hold Gold for Over 3 years: Gains qualify for LTCG with indexation, reducing tax significantly.
• Use Exempt Gifting Options: Gift gold to spouse, children, or parents – no gift tax applicable.
• Opt for Sovereign Gold Bonds: Avoid capital gains tax if held till maturity.
• Plan Sales Strategically: Spread out sales across financial years to stay within lower slabs.
• Keep Proper Documentation: Maintain purchase bills, gift deeds, and storage records to avoid tax scrutiny.

To Conclude

Understanding the tax on gold in India is important if you own, gift, or invest in gold. From capital gains to GST, each transaction carries specific tax implications. By being aware of the rules and planning your gold-related financial decisions wisely, you can stay tax-compliant and even save money legally. So, whether you’re buying gold for investment, securing a loan against it, or gifting it to loved ones, having clarity on the taxation aspect ensures peace of mind.

Frequently Asked Questions

Is gold taxable in India? 

Yes, gold is taxable under various laws depending on how it is acquired, held, or sold. Taxes include Income Tax on capital gains and GST on purchases.

Is digital gold taxed differently from physical gold?

No, digital gold is taxed similarly to physical gold. However, no GST is charged on its purchase.

Is gold received as a gift taxable? 

Gold received from relatives or on marriage is not taxable. Gifts from non-relatives above ₹50,000 may be taxable.