Got gold to sell? Here are the new tax rules

Reader’s question: I have some gold jewellery that I plan to sell. Will I get indexation benefits when calculating capital gains tax on the sale? - Joseph Erinjery

No, indexation benefits are no longer available on gold jewellery sold after July 23, 2024. The Finance (No. 2) Act, 2024, removed indexation for gold across asset classes, altering how capital gains on jewellery are calculated for millions of Indian households.

For investors holding physical gold or jewellery inherited across generations, this change has a direct bearing on the tax outgo at the time of sale. And the difference can be substantial.

What has changed, and when?

Indexation is the mechanism by which the purchase cost of an asset is adjusted upward for inflation using the Cost Inflation Index (CII) published by the Income Tax Department. A higher adjusted purchase cost reduces the taxable capital gain and therefore the tax payable.

Until July 22, 2024, long-term capital gains (LTCG) on gold jewellery were taxed at 20 per cent with indexation. The Finance (No. 2) Act, 2024, effective July 23, 2024, replaced this with a flat LTCG rate of 12.5 per cent without indexation for gold held for more than two years.

Some investors assume the lower rate of 12.5 per cent is always better than the old 20 per cent-with-indexation regime. This is not necessarily true. For gold purchased many years ago at a significantly lower price, the inflation-adjusted cost under the old system could have reduced the taxable gain so substantially that the effective tax worked out lower than 12.5 per cent of the full unadjusted gain. Whether the new regime is more or less favourable depends on the holding period and the gap between the original purchase price and the current sale price.

How gold jewellery is taxed today

The tax treatment depends entirely on how long the jewellery has been held.

Short-term (held for two years or less): Gains are treated as short-term capital gains (STCG) and added to the seller's total income for the year. Tax is levied at the applicable income-tax slab rate, which could be as high as 30 per cent (plus surcharge and cess) for those in the highest bracket.

Long-term (held for more than two years): Gains are taxed at a flat rate of 12.5 per cent (plus applicable surcharge and cess), without any indexation benefit, as per the Finance (No. 2) Act, 2024.

Inherited or gifted jewellery: If the jewellery was received as a gift or through inheritance, the original owner's purchase date and price are used to determine both the holding period and the cost of acquisition. Gains on the asset are not taxable at the time of inheritance or gifting itself, only at the point of sale.

A worked example: The real cost of losing indexation

Consider jewellery purchased in FY 2004-05 for Rs 2 lakh and sold in FY 2024-25 for Rs 18 lakh.

Under the old regime (20 per cent with indexation): The Cost Inflation Index for FY 2004-05 was 113; for FY 2024-25, it is 363 (as per the Income Tax Department's CII table). The indexed cost of acquisition = Rs 2,00,000 × (363 ÷ 113) = Rs 6,42,478. Taxable LTCG = Rs 18,00,000 − Rs 6,42,478 = Rs 11,57,522. Tax at 20 per cent = Rs 2,31,504.

Under the new regime (12.5 per cent without indexation): Taxable LTCG = Rs 18,00,000 − Rs 2,00,000 = Rs 16,00,000. Tax at 12.5 per cent = Rs 2,00,000.

In this case, the new regime results in a lower tax bill. However, for jewellery purchased more recently, say in FY 2015–16, with a smaller price appreciation, the indexed cost would be closer to the selling price, and the old 20 per cent-with-indexation regime could have been more favourable. The outcome is asset-specific and depends on the precise purchase year and price.

Important: Surcharge and health and education cess (4 per cent) apply in addition to the base rates above and are not included in this illustration.

A few points worth noting:

• The holding period threshold varies by asset class. Physical gold and gold mutual funds require more than two years for LTCG treatment, while gold ETFs cross the LTCG threshold after just one year, a meaningful difference for investors who may need to liquidate sooner.
• Sovereign gold bonds (SGBs) remain the most tax-efficient gold investment, but the maturity exemption is no longer blanket. Capital gains on redemption at maturity are exempt only where the bonds were subscribed to by an individual at the time of original issue and held continuously till maturity. If SGBs are transferred before maturity, gains after one year are taxed at 12.5 per cent without indexation, while gains within one year are treated as short-term and taxed at the slab rate.
• The tax treatment of gold ETFs and gold mutual funds has undergone multiple changes, so investors should carefully check the purchase date and the type of instrument. For transfers on or after July 23, 2024, listed units, such as gold ETFs, generally qualify as long-term after one year, while unlisted units, such as gold mutual funds, usually qualify as long-term after two years. Long-term gains are taxed at 12.5 per cent without indexation, while short-term gains are taxed at the slab rate.

Frequently asked questions

Does the two-year holding period for physical gold reset if the jewellery is remodelled or re-hallmarked? 

Remodelling or re-hallmarking does not reset the holding period. The holding period is calculated from the original date of acquisition of the gold, not from any subsequent changes to its form. What matters to the tax authorities is when the underlying gold was acquired, as per the Income Tax Act, 1961.

If I sell gold jewellery received as a gift from a parent, which cost of acquisition applies? 

The cost of acquisition is the price originally paid by the donor, your parent, when they purchased the jewellery. The holding period also counts from the donor's original purchase date, not the date you received the gift. This provision is contained in Section 49 of the Income Tax Act, 1961, and it means long-held family jewellery may qualify for LTCG treatment even if you have personally owned it for less than two years.

Can losses on gold jewellery be set off against other capital gains? 

Capital losses from the sale of gold jewellery can be set off against other capital gains, but with restrictions. Short-term capital losses can be set off against both short-term and long-term capital gains. Long-term capital losses can be offset only against long-term capital gains. Losses cannot be set off against income from other heads, such as salary or business income. Unabsorbed capital losses can be carried forward for up to eight assessment years, subject to the filing of income-tax returns within the due date.

Is GST applicable to the sale of old gold jewellery? 

GST is generally not applicable when an individual sells personal jewellery to a jeweller, since the transaction does not constitute a business supply under the GST Act. However, when new jewellery is purchased, GST generally applies at 3 per cent on the value of the gold jewellery sold to the consumer. Capital gains tax and GST are separate levies and operate independently.

Key investor takeaways

• Indexation is gone for gold. Whether physical jewellery, ETFs or mutual funds. Sovereign gold bonds still enjoy tax-free redemption at maturity, but only for individuals who subscribed at the time of original issue and held the bonds continuously till maturity.
• The new 12.5 per cent rate is not automatically better. For gold bought many years ago, the loss of indexation can result in a higher absolute tax outgo. The break-even point, where the old and new regimes produce the same tax outcome, depends on the purchase year and the CII applicable in that year.
• Inherited jewellery carries the original owner's purchase details. Families with jewellery acquired decades ago should maintain purchase receipts or valuations, as these directly reduce the taxable capital gain at the time of sale.

Gold ETFs have a shorter LTCG threshold (one year) than physical gold and gold mutual funds (two years). This asymmetry matters for investors who compare the after-tax returns across these instruments.

Also read: I am planning to invest in gold funds. How will it be taxed?

This article was originally published on March 17, 2025, and last updated on April 01, 2026.