Understanding Income Tax on Selling Physical & Digital Gold

We all know us Indians are traditionally one of the largest gold investors.

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With the emergence of other non-physical options such as digital gold, ETFs, gold funds, and sovereign gold bonds, India's gold investment has expanded.

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You can now take full advantage of gold investment without purchasing physical gold. Read our detailed guide on Digital Gold Investment.

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But as an investor, if you benefit from these investments, you also need to pay income tax on the gains made on your gold investments under various categories.

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Do you know what the tax on gold profits is and how are the capital gains from gold sales taxed?

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Whether you are investing in gold or already own gold, it is important for you to understand how physical and digital gold is taxed when it is sold.

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Indian tax authorities treat gold as an investment, so any capital gains from gold are included in net taxes.

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Jar explains to you how income tax is levied on Digital and Physical Gold: ‍

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Tax on Sale of Physical and Digital Gold
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The most common way of buying gold is in the form of jewellery, gold bars, coins and digital gold.

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Capital gains from the sale of physical gold is taxed based on whether it is short term or long term capital gains.  

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If you sell your gold assets (which may be gold jewellery, digital gold or coins) within three years from the date of purchase, any proceeds from that sale will be considered Short-Term Capital Gains(STCG).

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‍It will basically be added to your annual income and as a result you will have to pay tax effectively on the highest income tax slab under which your income falls.

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On the other hand, If you sell your jewellery, gold coins or digital gold after three years or more from the date of purchase, the proceeds from the sale will be classified as Long-Term Capital Gains (LTCG).

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Long-term capital gains from the sale of gold assets are taxed at 20%, with applicable surcharge and education cess. 

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In simple words, you have to calculate taxes with indexation. Indexation is a process by which the acquisition cost is adjusted with the inflation by inflating it by rate of inflation during the holding period.

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The higher the value, the lower the profit, and therefore the lower the total tax revenue.

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