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Buying Gold This Festive Season? Know How Will You Be Taxed

Adhil Shetty


An important aspect of Diwali celebrations is buying precious metals, utensils for the home, or purchasing other big-ticket items. Buying gold is especially popular as you can not only hand it down to the next generation, but also use it as a hedge against inflation. Further, investing in other forms of gold such as gold ETFs and gold bonds can give you profitable returns too.

While there’s no harm in upholding this tradition, it only makes sense to do so knowing fully well the charges that accompany your purchase. Yes, negotiations with your family jeweller may help you snag a discount, but there are other expenses that still remain—the biggest one being tax.

What Are The Taxes Involved When You Are Buying Gold Jewellery?

When you buy gold, you are liable to pay 3% GST on the price of the gold, including making charges. While negotiating with your jeweller can help waive off the making charges, you cannot avoid the GST on gold jewellery.

Apart from this, it is essential to remember that once you buy gold, selling it before 36 months are up will attract short-term capital gains tax. The profit or capital gain is added to your gross income and you will be taxed according to your tax slab. But, if you sell your gold after 36 months have passed, the sale will attract long-term capital gains. The capital gain that you earn is charged taxed at the rate of 20.8%, including cess.

 What Are The Taxes Involved When You Make Other Gold Investments?

With gold ETFs, you can invest in gold safely and without paying the making charges applicable on jewellery. This gives you better value for the money you’re parting with. Besides, gold ETFs give you returns without you having to worry about storing gold in its physical form and keeping it secure. More importantly, you only have to pay long term capital gains tax. It does away with sales tax, wealth tax and VAT.

Sovereign gold bonds, backed by the RBI, are another safe debt instrument that you can invest in. They aren’t eligible for TDS and you don’t have to pay any capital gains tax either. In fact,  when you transfer the bond the indexation benefits on long term gains are provided too.

A recent entrant to gold investments, the Gold Monetisation Scheme is another alternative that you can consider if you want to invest with minimal risk. Introduced by the government, it aims to safeguard your gold and use it to generate returns too. Best of all, returns from this scheme are not only free from capital gains tax, but also from wealth and income tax applicable on capital gains tax.

So, this festive season remember that everything that glitters isn’t tax-free! Knowing how you are taxed will help you calculate your total expense and ensure that you’re getting a truly shiny  deal.

The writer is CEO, BankBazaar.

BankBazaar.com is a leading online marketplace in India that helps consumers compare and apply for credit card, personal loan, home loan, car loan, and insurance.