Gold investment: Gold, a highly coveted metal renowned for its ornamental allure and investment appeal, holds a prominent status due to the enduring confidence that the Indian populace has vested in it. Notably, in the fiscal year 2023-24, India’s gold imports surged to a noteworthy $45.54 billion, marking a substantial uptick of 33.34% from the preceding year. The upward trajectory in the value of gold has been a prevalent trend in recent times, with the ongoing year showcasing remarkable growth.
Over the period spanning last Dussehra to the current year’s Dussehra, gold has exhibited a remarkable return of 23%, surpassing the performance of several other classes of assets and instilling a sense of assurance among Indian investors.
Till now in 2024, the price of gold has exhibited a consistent upward trend, shattering multiple price milestones along its ascent. Projections suggest that the price is poised to breach the Rs 80,000 per 10 gm threshold by the Dhanteras-Diwali period. As the upcoming festive season is anticipated to witness heightened gold acquisitions, potential buyers may harbor inquiries regarding the tax ramifications linked to acquiring physical gold.
Taxation on physical gold
In India, regulations on gold holdings and taxation are in place to regulate imports and encourage financial transparency. While there is no maximum limit for holding physical gold (e.g. jewellery, coins, bars), the Income Tax Act outlines certain restrictions. It is essential to demonstrate that gold holdings above these limits have been acquired using legitimate sources of funds. This requirement is determined by the Central Board of Direct Taxes, taking into account the taxpayer’s gender and marital status.
The guidelines set by the Income Tax Department define the allowed amounts of gold an individual can possess based on their marital status. A married woman is permitted to have up to 500 grams of gold, while unmarried women have a limit of 250 grams. For men, the maximum amount allowed is 100 grams. Following these specified limits typically eliminates the necessity for extensive documentation.
“While most personal effects are generally not subject to capital gains tax, certain items are specifically excluded from this exemption and categorised as capital assets. These include jewellery, archaeological collections, drawings, paintings, sculptures, and other works of art. Gains from the sale of these items are taxable under capital gains tax regulations. Jewellery encompasses a variety of ornaments made from precious metals such as gold, silver, and platinum,” CA (Dr.) Suresh Surana said.
| Particulars | Holding period | Rate of Tax |
| Short-Term Capital Asset |
Sold / redeemed or maturity before 23rd July 2024 ≤ than 36 months. | At slab rates. |
| Long-Term Capital Asset |
Before 23rd July 2024 > than 36 months On or after 23rd July 2024 > than 24 months. |
Before 23 July 2024: – 20% with indexation. On or after 23 July 2024: -12.5% without indexation. |
Short-term Capital Gains Tax (STCG)
STCG is applicable when gold is sold within three years of purchase. The profit gained from this sale is considered a part of the individual’s income and is subject to taxation based on their income tax slab. For example, if an individual falls into the 30% tax slab, the profit amount (sale price minus purchase cost) will be taxed at 30%.
Long-term Capital Gains Tax (LTCG):
LTCG on gold profits from sales made after three years of purchase is set at 20%, with the benefit of indexation available to adjust the purchase price taking into account the impact of inflation. This tax can be exempted if the net proceeds are utilized to purchase government tax-benefit bonds or invest in property within specified time frames.
It is important to disclose in Income Tax returns gold as part of domestic assets held if the taxpayer has a total income of more than Rs 50 lakh.