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Gold ETFs Are Financial Assets

Mahendra Patel wants to invest in a Gold ETF. He wants us to throw some light on its tax implications

long and short term tax structure for this. Also clarify whether wealth tax is applicable on these funds if they are purchased from the NSE in my demat a/c.?
-Mahendra Patel

Gold ETFs are treated as financial assets. The tax treatment on the gains from a Gold ETF are somewhat similar to those of nonequity. In case of gold ETFs, one can benefit by using the indexation benefit and reduce their tax liability. If you hold gold in physical form, you are liable to pay a wealth tax of one per cent on the amount of physical holding above Rs 15 lakh. There is no such wealth tax applicable to gold ETFs. These ETFs also have an upper hand when we consider the time period while computing the gains. If you sell physical gold within three years of holding, you are liable to pay short term capital gains tax. The same period in case of gold ETFs is just one year.

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