How Tax on Gold in India Works: Purchase Tax, GST, Capital Gains, and Exemptions Explained
Gold has long been considered a reliable form of wealth in
India. Whether purchased for investment, jewellery, or cultural traditions,
gold remains one of the most preferred assets among Indian households. However,
many buyers are unaware of the actual tax on gold in India, including
GST, capital gains tax, and rules related to inheritance or gifting.
Understanding taxation helps buyers make informed financial decisions and avoid
penalties during audits or resale.
In recent years, with increasing digital transactions and
high gold prices, authorities have tightened tax reporting requirements.
Whether you hold physical gold, digital gold, ETFs, or Sovereign Gold Bonds,
the taxation rules differ based on
the type of holding, purpose, and duration.
Before buying or selling, it is important to understand how
much tax on gold in India applies and how the rules differ between
purchase, resale, digital formats, and inherited gold.
What does the Income Tax Act say about the sale of gold in India?
Under the Income Tax Act, gold is treated as a capital
asset. Any profit earned from selling gold is considered capital gains. The
tax depends on how long the asset was held before sale.
When gold is sold within three years of purchase, profits
are added to the individual's income and taxed as per the applicable slab. If
the gold is held for more than three years, then long-term capital gains tax
applies, with indexation benefits.
Buyers should also keep proper invoices for gold purchases.
In case of tax scrutiny, unexplained gold holding may be treated as undisclosed
income, attracting penalties.
How much gold is legally allowed per person in India?
The CentralBoard of Direct Taxes (CBDT) allows individuals to legally hold gold
without the requirement of income proof. The permitted holding limits vary
based on gender and marital status. These rules apply during tax assessments or
searches under the Income Tax Act.
Approved limits are:
- Married women: Up to 500
grams
- Unmarried women: Up to 250
grams
- Men: Up to 100 grams
- Hindu Undivided Families
(HUFs): Limit depends on legitimate household wealth and income records
These limits apply only when authorities question gold
ownership. There is no fixed restriction on buying or holding gold by law.
However, if gold beyond these levels is discovered without proper proof, it may
be taxed or seized.
Sovereign Gold Bonds (SGBs)
SGBs are considered one of the most tax-efficient ways to
hold gold. Gains are fully exempt if bonds are held until maturity, which is
eight years. Interest earned during the holding period is taxable under the
income tax slab.
How to calculate tax on gold sales in India
Tax calculation depends on whether the gain falls under
short-term or long-term capital gains.
Short-Term Capital Gains: If sold within three years of
purchase, profit is taxed as part of income at slab rates.
Long-Term Capital Gains: If held for more than three years,
a 20 percent LTCG tax applies with indexation benefit.
Indexation reduces tax liability by adjusting the purchase
cost for inflation. Whether selling jewellery, gold coins, bars, digital gold,
ETFs, or SGBs, tax rules apply similarly, except SGBs which remain exempt upon
maturity.
How much is GST on gold in India?
GST applies only at the time of purchase. There is no GST on
resale.
The current GST structure is:
- 3 percent GST on the value
of physical gold (jewellery, bars, or coins)
- 5 percent GST on making
charges, if shown separately
The GST rate is uniform nationwide and has replaced earlier
excise and VAT systems. The GST on gold in India has made purchase costs
slightly higher compared to pre-GST era but has improved billing transparency.
Tax Rules for Digital, Physical, and Paper Gold Investments in India
Gold investments are available in different forms. Tax rules
differ based on format, holding period, and type of investment.
For long-term holdings, the current tax rate is 12.5 percent
without indexation. Short-term gains are taxed as per income tax slab rates.
Income Tax on Digital Gold in India
Digital gold is similar to physical gold in taxation.
Investors purchase units backed by physical reserves stored in secure vaults.
However, digital gold is not regulated directly by SEBI or RBI.
Tax rules:
- Digital gold held for 24
months or more is treated as long-term capital assets.
- Short-term gains apply if
sold before 24 months.
- Long-Term Capital Gains (LTCG)
attracts 12.5 percent tax,
- While Short-Term Capital
Gains (STCG) is charged as per slab rate.
Taxes on Physical Gold Purchase
This includes jewellery, ornaments, gold coins, and bullion.
Resale rules:
- Selling gold after two
years attracts long-term capital gains tax of 12.5 percent.
- If sold within two years,
profit is added to income and taxed at slab rates.
- Invoices and valuation
certificates are required when selling old gold to jewellers.
Income Tax on Paper Gold in India
Paper gold refers
to investments such as Gold ETFs, gold-focused mutual funds, and Sovereign Gold
Bonds.
For ETFs and mutual funds, gains are taxed as:
- 12.5 percent on long-term
capital gains
- Income slab rates for
short-term gains
- SGBs remain tax exempt at
maturity.
Income Tax on Gold Derivatives
These are treated differently because they fall under
commodities and futures trading. Profit is treated as business income and taxed
as per slab. Traders may claim expenses and maintain proper books as per
Section 44AD for presumptive taxation.
Income Tax on Gift or Inheritance of Gold
Gold received through inheritance or gift may be exempt from
tax. However, tax applies when such gold is sold.
Tax rules:
- Gifts from relatives or
parents, spouse, or children are tax-free.
- Gold gifted during
marriage ceremonies is exempt.
- If gold value exceeds Rs
50,000 and is received from non-relatives, it becomes taxable as “Income
from Other Sources.”
- Upon sale, capital gains
tax applies based on original purchase date and cost.
Income Tax Rules on Gold for NRIs
Non-resident Indians may purchase digital gold, physical
gold, ETFs, and gold mutual funds. However, SGB purchase is not allowed.
Tax rules remain the same as Indian residents.
Import Tax on Gold in India
In addition to domestic taxes, imported gold attracts
customs duty. The total burden includes:
- Basic Customs Duty
- Agriculture Infrastructure
Development Cess
- GST at time of purchase
These duties affect retail price. Import policy also varies
depending on international trade agreements and government policy.
As of 2025, the import tax on gold in India consists of
multiple components. The main ones are: basic customs duty (BCD), an
agriculture-infrastructure cess (AIDC), and sometimes additional components
depending on the transaction.
- Basic
Customs Duty (BCD): 5%
- Agriculture
Infrastructure & Development Cess (AIDC): 1%
- Combined
effective import duty: 6% (5% BCD + 1% AIDC) for standard
bullion/coins/bars.
That 6% applies to many standard imports under current
regulations.
Final Thoughts
Understanding the structure of tax on gold in India,
including GST, capital gains, and rules for digital and physical gold, helps
investors avoid compliance issues and plan effectively. Whether gold is
purchased for investment, inheritance, or saving, knowing the rules ensures
transparency and protects buyers from penalties.
Read also : GST Reforms 2025: More Savings for Consumers, Growth for Businesses
Use our Gold Loan EMI Calculator
Public FAQs
1. Is there tax on selling old jewellery?
Yes. If sold after three years, long-term capital gains apply. Otherwise, gains
are added to income and taxed as per slab.
2. Do I pay GST when selling gold?
No. GST applies only during purchase, not during resale.
3. Are Sovereign Gold Bonds tax-free?
Yes. Capital gains are tax-exempt if bonds are held until maturity.
4. What happens if I own more gold than the permitted limit?
Owning more is allowed, but income proof or invoices must be provided during
tax assessments.
5. Is digital gold safer than physical gold?
Digital gold removes storage risk but is not regulated by SEBI or RBI. Investors should evaluate carefully.
