Income tax rule for gold: Amid fear of the Iran-Israel war, the gold rate today is in an uptrend bias. Despite the weak opening of the gold price today on the Multi Commodity Exchange (MCX), gold price in the domestic market has risen to the tune of 7.60 percent in April 2024 whereas it has delivered more than 15 percent return to the gold investors in YTD time. So, at this juncture, when the market experts are still expecting a bounce back in gold prices, it is important to know how the income tax rule applies to income booked from gold investments.
Gold price rally in recent intervals
Speaking on the gold price rally in recent time intervals, Anuj Gupta, Head of Commodity & Currency at HDFC Securities said, “In YTD time, gold rate today is higher by ₹9,500 per 10 gm from its 2023 close price of nearly ₹63,200 per 10 gm. This means gold prices have appreciated to the tune of 15 percent in YTD time. Likewise, in April 2024, gold prices have appreciated to the tune of 7.60 percent. However, in one year, the gold prices have surged by around ₹13,000 per 10 gm, which is around 22 percent higher from its price of around ₹59,500 per 10 gm a year ago.”
Income tax rule for gold
Speaking on the income tax rules applicable to one’s return from gold investments, Mumbai-based tax and investment expert Balwant Jain said, “If the investment is in physical gold, then there will be a different set of income tax rules applicable on one’s income from gold. To calculate one’s income from gold, one needs to look at the period of investment. If someone books profit in gold after holding it for less than three years, then the income tax will be calculated under the short-term capital gain rules whereas, for three years or above, the income tax will be calculated under the long-term capital gain rules.”
Balwant Jain said that short-term gains on gold are added to the net income of an investor and the income tax is levied as per the income tax slab applicable in sync with one’s net annual income. However, for long-term capital gains, income from gold is taxed 20 percent plus cess, which is 4 percent these days. However, Balwant Jain maintained that income from gold is calculated as per the indexation of gold price and not based on the price at which one has bought the gold. He said that the income tax department of CBDT declares gold price after indexation every year, which is compared against one’s year of purchase.
Income tax rule for gold ETF, digital gold
On the income tx rule applicable to income from other than physical gold investments, Sujit Bangar, Founder of Taxbuddy.com said, “Income from gold, which is other than the physical gold investment, include Gold ETF, Sovereign Gold Bond and other digital gold or gold mutual funds.”
On how digital gold investments are taxed, the Taxbuddy.com founder said, “Starting from April 1, 2023, investments made on or after April 1, 2023, the Budget 2023 amendments state that investors won’t receive the indexation benefit when calculating long-term capital gains on debt mutual funds. However, this change only applies to debt mutual funds where equity investments don’t exceed 35%. Additionally, this change also applies to gold mutual funds and gold ETFs. Therefore, these debt mutual fund schemes will be subject to taxation at the income tax slab rates corresponding to your income.” However, he maintained that Sovereign Gold Bonds don’t fall in this debt mutual funds bracket if it has been redeemed after the maturity period of eight years.
Income tax on income from SGB
“Income from SGB is 100 percent tax exempted if it is redeemed after the maturity period of 8 years. However, in case an investor books profit after 5 years of investment but before the maturity period, then in that case the SGB investment will be considered as electronic gold and it will be taxed as per the debt mutual funds are taxed from 1st April 2023,” said Bangar.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 22 Apr 2024, 12:28 PM IST