Tax On Gold: Many types of taxes including GST are levied on buying or selling gold, know the details here

 
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Do you know how much tax is levied on buying or selling gold? In some cases, you also have to pay income tax on the purchase of gold. Let us know in detail about the tax levied on it (Tax From Gold Earning).

Income Tax on Gold Purchase in India: In the financial year 2021-22, gold imports in the country were $46.14 billion, which is 33.34% more than last year.

When it comes to gold, we know how important a role it has played in our culture and traditions for centuries. At the same time, due to the continuous increase in its prices over the last few years, people also like to invest in it. Because investing in gold gives reliable returns over time. Therefore, it is an attractive investment option for investors who want to diversify their portfolio. This is the reason why gold imports in the country in the financial year 2021-22 were $46.14 billion, which is 33.34% more than last year.

But do you know how much tax is levied on buying or selling gold? In some cases, you also have to pay income tax on the purchase of gold. Let us know in detail about the tax levied on it (Tax From Gold Earning).

Taxes on Physical Gold Purchase

Buying or selling physical gold includes jewellery, gold biscuits, coins, etc. According to the Indian Income Tax Act, 20% tax is levied on the sale of physical gold, along with a cess of 4% on long-term capital gains (LTCG). Thus, the overall taxable rate on gold is 20.8%. However, this rate does not apply to short-term capital gains.

When it comes to physical gold, there are a few other things you need to keep in mind:

1) Custom Duty on Gold in India 2024

The government levies custom duty or import duty on imported gold. As a large part of India's gold demand is met through imports, our domestic gold mines are unable to meet this demand. Custom duty is levied on most of the imported gold. Recently, the Government of India has reduced the custom duty on gold bars from 12.5% ​​to 10%. Combined with GST, the final tax on physical gold becomes 10% plus 3% GST.

2) Agriculture Infrastructure Development Cess (AIDC)

The Government of India collects AIDC for the development of the nation. 5% AIDC is levied on the import of gold. The total tax on gold comes to 18% when the import duty, GST and AIDC are added.

3) Goods and Services Tax (GST Rate on Gold 2024)

GST (Goods and Service Tax) is levied on the sale of gold by jewelers or traders. 3% GST is levied on the purchase of physical gold. For example, on importing gold worth Rs 1 lakh, 3% GST will be levied on Rs 1,15,000 (after adding import duty and cess). That is, Rs 3,450, which will increase the price of gold for the customer to Rs 1,18,450.

4) Making charge and GST on it (GST on Making Charges)

Though making charges are not included in the tax, they are levied on the processing of gold into coins or jewellery, which attracts additional GST.

5) Tax Deduction at Source (TDS)

TDS of 1% is levied on purchasing physical gold worth more than Rs 1 lakh. This amount can be adjusted against the annual tax liability.

Tax on selling physical gold

1) Short Term Capital Gain Tax (STCG)

STCG (Short-term Capital Gains Tax) is applicable when gold is sold within three years of purchase. This gain is added to the income of the individual and taxed based on his income tax slab, for example, if one falls under the 30% slab, then the gain amount (selling price – purchase price) will be taxed at 30%.

2) Long Term Capital Gain Tax (LTCG)

LTCG of 20% is levied on the profit made on gold sold after three years of purchase, in which indexation benefit is used to adjust the purchase price keeping in view the inflation.

3) GST on jewelry exchange  

The exchange of gold jewellery involves taxation related nuances, so a lot of caution needs to be taken during the transaction. GST is not applicable on exchanging the same amount of gold. For example, there is no GST applicable on exchanging 100 grams of jewellery for another 100 grams of jewellery, the charge is only applicable for the difference in the making charge and the tax associated with it.

Tax on digital gold

People's interest in digital gold has increased a lot in the last few years. But many people still do not know much about the tax on digital gold. Digital gold is taxed just like physical gold. The only difference is in the method of purchase - anyone can buy digital gold online.

Capital Gains Tax on Digital Gold

If the digital gold kept in the digital vault is sold within 3 years, the profit earned from it is considered as short term capital gain tax. This capital gain is added to your total income and tax is levied on this gain according to your tax slab. On the other hand, selling digital gold after 3 years is considered as long term capital gain (LTCG). On which 20% tax is levied after indexation benefit.

GST on buying digital gold

Just like physical gold, 3% GST is levied on buying digital gold. That is, every time you buy digital gold through Google Pay, Paytm and PhonePe, you will have to pay GST. On the other hand, if you convert digital gold into jewellery, then making charges and delivery fees are levied on it. The taxation structure for digital gold includes the following:

Tax on SGB (Sovereign Gold Bond)

SGB ​​is an excellent way to invest in gold, especially for those who want to hold the investment for three to eight years. Although interest income is taxable, the LTCG exemption and minimal GST liability make SGB an attractive investment option compared to physical gold.

Short Term Capital Gain (STCG)

STCG is applicable if SGBs are sold within three years of purchase.
It is added to a person's income and taxed based on his tax slab.

Long Term Capital Gain Tax (LTCG)

If SGBs are sold after three years, LTCG (Long-Term Capital Gain) is applicable.
Tax is levied at 20% with indexation benefit or 10% without indexation.

Tax Benefits of SGB

No GST or charges: SGBs are considered securities and digital assets on which GST is not applicable.
Minimum GST liability: Maximum 0.75% GST is applicable on STT and brokerage.
No TDS: Tax deduction at source (TDS) is not applicable for SGBs.

Tax on interest income

Interest Rate: SGBs offer an interest rate of 2.5% per annum.
Tax Liability: The interest profit is added to your income and is taxed as per the tax slab applicable to you.

Tax on paper gold

Apart from digital gold and physical gold, another way to invest in gold is paper gold. Let us tell you that except Sovereign Gold Bond (SGB), redeeming or selling units of Gold ETF and Gold Mutual Fund is taxed just like physical gold.
Ways to invest in it: Gold Mutual Fund and ETF

Tax on Capital Gains

Long Term Capital Gain (LTCG): 20.8% with indexation benefit.
Short Term Capital Gain (STCG): Taxed as per your income slab.

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