Buying gold on the occasion of Dhanteras and Diwali is an old tradition in India. It not only enhances the beauty of a woman but also provides great support in bad times. People consider gold as a companion in times of crisis and a kind of protective shield, this is the reason why people have a special attraction towards gold.
If you are planning to buy gold jewellery or coins this Dhanteras and Diwali, it is important to know how much tax you will have to pay. You will be surprised to know that tax is levied both on buying and selling gold jewellery.
Tax rules on gold jewellery
Long Term Capital Gains (LTCG) and Short Term Capital Gains (STCG) are taxable on gold. Budget 2024 has reduced the LTCG on gold from 20% to 12.5%. So if you sell gold after holding it for two years, 12.5% LTCG tax will have to be paid on the profit. However, Budget 2024 has removed indexation on gold investments. So now you will not get the indexation benefits applicable on LTCG. For physical gold after Budget 2024, the holding period for STCG has been reduced from three years to two years.
Tax on Gold Mutual Funds
Capital gains tax rules were changed after Budget 2024. According to the new rule, the holding period for short-term capital gains will be reduced in the new rule but the tax rate will not change. For units of gold mutual funds purchased between April 1, 2023, and March 31, 2025, regardless of the holding period, the gain will be added to taxable income and taxed as per the income tax slab.
Gold ETFs
If you buy gold ETFs, the gains will be added to taxable income and taxed at applicable slab rates (irrespective of the holding period). Remember that if you buy gold ETFs after March 31, 2025 and sell them after 12 months, the gains will be taxed at 12.5% without indexation benefit.
while selling gold jewellery
The tax levied when selling gold jewellery is based on how long you kept it with you. While selling it, tax is levied on the basis of short term capital gains or long term capital gains.
Tax on gold received as gift
People gift gold or jewellery to their relatives, friends and loved ones on Dhanteras or Diwali. If you are getting gold as a gift from family or relatives, then you can get exemption from income tax on it. However, if you get gold worth more than Rs 50,000 as a gift from any other person, then you will have to pay tax. This income will be taxable because it will be considered as income from other sources.