How will different types of gold investments be taxed now?

Gold has always been India's preferred child when it comes to investing. In fact, Indian households hold as much as 25,000 tonnes of gold, according to a July 2023 World Gold Council report. That's more gold than even in some of the developed economies' coffers. Given their popularity among us, it is important to look at how gold investments will be taxed following the recent change in capital gains tax rules. Physical gold taxation changes Short-term capital gains Old rule New rule If sold within three years, the gains were added to the taxable income and taxed at the applicable income tax slab rates. If sold within two years, the gains will be added to taxable income and taxed at the applicable income tax slab rates. Remark: The reduced holding period is unlikely to affect many investors, as physical gold is typically held for the long term. Long-term capital gains Old rule New rule If sold after three years, a 20 per cent tax was applicable on the gains, along with indexation benefit. If sold after two years, a 12.5 per cent tax will be payable on the gains. However, indexation benefits will no longer be applicable.  Remark: Although a shorter holding period might benefit some investors, removing the indexation benefit will lead to a higher tax liability. Gold mutual fund taxation changes Short-term capital gains Old rule New rule If the units were sold within three years of purchase, the gains were added to the taxable income and taxed at the applicable income tax slab rates. If investment is made on or after April 01, 2023 and sold within two years, the entire gain is added to the investors' income and taxed according to the applicable slab rate. Remark: A shorter holding period will promote medium-term investments. Long-term capital gains Old rule New rule If the units were purchased before March 31, 2023, and sold after three years, 20 per cent tax on the gains was applicable,

This article was originally published on August 26, 2024.