Income Tax Calculator: Investing in gold on Akshaya Tritiya is considered auspicious. Today, there are different variations of the yellow metal that an investor looks for while making an investment decision. Those forms are physical gold, paper gold and electronic gold. Physical gold is a traditional form of gold investment while paper gold and electronic gold are newer forms of precious metal investment.
Income Tax Rules on Physical Gold
Speaking on the income tax rule on physical gold, Archit Gupta, Founder and CEO, Clear said, “Gold investments are classified as physical gold, digital gold and paper gold. Taxation of physical gold, such as jewelry and coins , depending on the holding. Duration. For example, if you sell physical gold within three years of purchase, you incur short-term capital gains (STCG). Short-term capital gains are added to your total taxable income and Taxes are levied as per your income tax slab.However, long term capital gains on sale of gold after three years are taxed at 20.8% (including cess) with indexation benefit.
How are investments in Digital Gold taxed?
“Digital gold is taxed at the same rate as physical gold and depends on the holding period. Capital gains on digital gold held for less than three years are taxable at the applicable income tax slab rates. However, sales Long-term capital gains tax on digital gold with indexation gains at 20.8% (including cess) after three years. Indexation allows taxpayers to recalculate the purchase price of investments after adjusting for inflation, thereby reducing tax outgo It happens,” said Archit Gupta of Clear.
Income tax rule on paper gold
Paper gold includes gold ETFs, gold mutual funds and sovereign gold bonds (SGBs). Gold ETFs and gold mutual funds are taxed at the same rate as physical gold. However, SGBs have different taxation rules.
“Investors get 2.5 per cent interest per annum from SGBs, which is added to the taxable income of the investor and taxed as per applicable income tax slabs. SGBs have a maturity period of eight years. Capital gains from SGBs, if are held till maturity, are tax-free,” said Archit Gupta.
However, investors can prematurely redeem the SGB after five years. If you redeem the SGB between five and eight years, the gain is considered a long-term capital gain. It is taxed at 20.8% (including cess) with indexation benefit.
Investors can buy and sell SGBs on the stock exchange. If the SGBs are sold before three years, the capital gains are added to the income of the investor and taxed based on the applicable income tax slab. In addition, the capital gains earned by investors on selling SGBs on the stock exchange after three years are longer term and are taxed at 20% along with indexation gains.