Finance Minister Nirmala Sitharaman today announced that there would be no capital gain tax levied if physical gold is converted to Electronic Gold Receipt (EGR) or e-gold and vice versa. The finance minister said that the move would promote gold investors to move towards electronic equivalence of gold. The finance minister made the announcement while presenting the Union Budget 2023 on Wednesday while delivering the budget speech in the parliament.
“The conversion of physical gold to Electronic Gold Receipt and vice versa is proposed not to be treated as a transfer and not to attract any capital gains. This would promote investments in electronic equivalent of gold,” FM Nirmala Sitharaman said in parliament.
Decoding this new capital gain tax on conversion of physical gold to e-gold, Mumbai-based tax expert Balwant Jain said, “One should note that the capital gain exemption is available at the time of conversion only. When an investor book profit on one’s gains, he or she will have to pay capital gain tax on the actual cost he or she paid for buying the physical gold.”
Explaining with an example, Balwant Jain said, “In 2008, physical gold was priced around ₹9,000 per 10 gm whereas today physical gold is priced around ₹58,000 per 10 gm. If someone had bought physical gold in 2008 and today he or she goes for conversion of is gold that it bought in 2008, no capital gain will be levied. However, at the time of profit booking, one’s capital gain will be decided on the cost price of one’s gold i.e. ₹9,000 per 10 gm not ₹58,000 per 10 gm.”
Balwant Jain further added that it should not be taken from the gold monetization scheme as it has nothing to do with that. They also added that at the time of profit taking, capital gain tax would be levied on the actual cost of the gold investor.
EGRs are depository gold receipts traded on the stock exchanges. Under this form, investors buy the gold in dematerialised form and are given gold receipts instead of physical gold. The BSE was the first stock exchange to launch EGRs on its platform.