Capital Gains Tax on Gold in India (FY 2024-25): How to Calculate & Save Tax
- Dipali Waghmode
- 6 days ago
- 9 min read
The capital gains tax on gold is a crucial consideration for anyone selling their gold investments. Wondering how your gold sale will be taxed under the Income Tax Act for the financial year 2024-25? This article explains everything about the tax on gold, including a detailed look at short-term and long-term gains. It also covers calculation methods for every type of gold investment and effective strategies to save on your gold investment tax for the Assessment Year (AY) 2025-26.
Table of Index
Understanding Capital Gains on Gold: Short-Term vs. Long-Term
Capital gains tax on gold applies because gold is considered a 'capital asset' under tax laws. The tax you pay depends entirely on the gold holding period, which is the duration you own the asset before selling it. This period determines if your profit is a short-term capital gain (STCG) or a long-term capital gain (LTCG).
The critical difference between short-term capital gains on gold and long-term capital gains on gold is the 36-month timeline.
Short-Term Capital Gain (STCG): If you sell your gold within 36 months (3 years) of buying it, the profit is an STCG.
Long-Term Capital Gain (LTCG): If you sell your gold after holding it for more than 36 months, the profit is an LTCG.
This distinction is vital because the tax treatment for each is very different.
Feature | Short-Term Capital Gain (STCG) | Long-Term Capital Gain (LTCG) |
Holding Period | Sold within 36 months of purchase | Sold after 36 months of purchase |
Tax Treatment | Added to your total income and taxed at your applicable slab rate. | Taxed at a flat rate of 20% after indexation. |
Tax on Different Types of Gold Investments: A Complete Comparison
The tax on gold investments varies depending on the form in which you hold it. The rules for physical gold are different from digital or paper-based gold like Gold ETFs and Sovereign Gold Bonds (SGBs).
A tax on physical gold is the most common query. The tax on gold ETF investments follows similar principles but with nuances in how they are traded. A unique option is the Sovereign Gold Bond tax structure, which offers significant advantages for long-term investors. Understanding the capital gain on SGB is particularly important because the tax exemption upon maturity is a special feature guaranteed by the RBI and the Government of India.
Here is a complete comparison of the tax implications for different gold investments for the Assessment Year 2025-26.
Investment Type | Holding Period (for LTCG) | LTCG Tax Rate | STCG Tax Rate | Indexation Benefit | Key Feature |
Physical Gold/Jewellery | > 36 months | 20% | Slab Rate | Yes | Direct ownership. |
Gold ETFs / Mutual Funds | > 36 months | 20% with indexation. | Slab Rate | Yes | Traded on exchanges like stocks. |
Digital Gold | > 36 months | 20% with indexation. | Slab Rate | Yes | Not regulated by SEBI. |
Sovereign Gold Bonds (SGBs) | > 36 months (for sale) | 20% with indexation (if sold on exchange after 3 yrs) | Slab Rate (if sold within 3 yrs) | Yes (if sold on exchange) | Capital gains are tax-exempt on redemption after 8 years. Interest is taxable. |
Note: Gold ETFs are an efficient way to invest in gold electronically. For official SGB rules, you can refer to the RBI's official SGB guidelines.
How to Calculate Long-Term Capital Gains (LTCG) on Gold with Indexation
To properly calculate how to calculate capital gains on gold held for the long term, you must understand indexation. The indexation benefit on gold is a crucial tool that adjusts your purchase price for inflation, which lowers your taxable profit.
This adjustment uses the Cost Inflation Index (CII), a figure notified each year by the Central Board of Direct Taxes (CBDT). The CII for gold helps in finding the inflation-adjusted cost, known as the Indexed Cost of Acquisition.
Here’s the step-by-step process:
Formula for LTCG Calculation
LTCG = Final Sale Price - (Indexed Cost of Acquisition + Indexed Cost of Improvement + Transfer Expenses)
The most important part is the indexed cost of acquisition formula:
Indexed Cost of Acquisition = Original Purchase Price x (CII of Sale Year / CII of Purchase Year)
Example Calculation:
Let's say Mrs. Sharma bought gold jewellery in June 2015 for ₹5,00,000 and sold it in October 2024 for ₹12,00,000. She spent ₹10,000 on transfer expenses.
CII for Purchase Year (2015-16): 254
CII for Sale Year (2024-25): 363
Step 1: Calculate the Indexed Cost of Acquisition
Indexed Cost = ₹5,00,000 x (363 / 254)
Indexed Cost = ₹7,14,567
Step 2: Calculate the Long-Term Capital Gain
LTCG = ₹12,00,000 - (₹7,14,567 + ₹10,000)
LTCG = ₹4,75,433
Step 3: Calculate the Tax Payable
Tax = 20% of ₹4,75,433
Tax = ₹95,087 (+ 4% cess)
Cost Inflation Index (CII) Table
Here are the CII values for recent years. You can find the full official Cost Inflation Index (CII) table on the Income Tax Department's website.
Financial Year | CII |
2024-25 | 363 |
2023-24 | 348 |
2022-23 | 331 |
2021-22 | 317 |
2020-21 | 301 |
2019-20 | 289 |
2018-19 | 280 |
2017-18 | 272 |
2016-17 | 264 |
2015-16 | 254 |
How to Calculate Short-Term Capital Gains (STCG) on Gold
Calculating the tax on gold sold within 3 years is much simpler. To calculate short-term capital gains, you don't get any indexation benefit. The profit is simply the difference between the sale price and the purchase price.
This profit is then added to your total annual income and taxed according to your applicable income tax slab rate.
Formula for STCG Calculation
STCG = Final Sale Price - Original Purchase Price - Transfer Expenses
Example Calculation:
Imagine Mr. Kumar bought gold coins in May 2023 for ₹2,00,000. He sold them in April 2024 for ₹2,50,000, without any transfer expenses.
STCG = ₹2,50,000 - ₹2,00,000 - ₹0
STCG = ₹50,000
This ₹50,000 profit is added directly to Mr. Kumar's total taxable income for the year. If he is in the 30% tax bracket, he will pay ₹15,000 (plus cess) as tax on this gain.
Special Case: Tax on Inherited or Gifted Gold
The tax on inherited gold is a common point of confusion. While you don't pay any tax when you receive gold as an inheritance or a gift from specified relatives, a tax liability arises when you decide to sell it. The profit from selling inherited jewellery is taxed as capital gains.
There are two critical rules for calculating capital gains on gifted gold:
Holding Period: The period for which the previous owner held the gold is added to your holding period to determine if the gain is short-term or long-term.
Cost of Acquisition: Your cost of acquisition is the price the original owner paid for the gold. If the original purchase was before April 1, 2001, you can use the Fair Market Value as of that date.
Example Scenario:
Your mother bought gold jewellery in 2010 for ₹3,00,000. She gifted it to you in 2018. You sell it in 2024 for ₹9,00,000.
Your Holding Period: Since your mother held it from 2010, the total holding period is over 36 months, making it a long-term capital gain.
Your Cost of Acquisition: Your purchase cost is considered to be ₹3,00,000 (the price your mother paid).
Calculation: You will calculate LTCG using the ₹3,00,000 cost and apply indexation from the year 2010 to 2024 to find your taxable gain.
How to Save Capital Gains Tax on Gold: Your Options Under Section 54F
A key strategy for how to save capital gains tax on gold involves using Section 54F of the Income Tax Act. This section provides a powerful way to get an exemption on long-term capital gains (LTCG) from selling any asset other than a house, including gold.
The primary condition for this reinvestment of capital gains is to use the entire net sale proceeds to buy or construct a new residential house property.
Here are the rules to claim exemption under Section 54F:
The exemption is available only to individuals and Hindu Undivided Families (HUFs).
You must reinvest the entire net consideration (sale price minus transfer expenses) to get a full tax exemption. If you invest only a portion, the exemption will be proportionate.
On the date of selling the gold, you should not own more than one other residential house.
If you cannot invest the amount before filing your tax return, you can deposit it in a Capital Gains Account Scheme (CGAS) with a bank to claim the exemption.
Investment Timeline for the New House
Condition | Timeline |
Purchase New House | Within 1 year before or 2 years after the date of sale. |
Construct New House | Within 3 years after the date of sale. |
Disclaimer: The conditions under Section 54F can be complex. It is highly recommended to consult a tax expert for personalized advice before making any investment decisions.
Conclusion: Key Takeaways for Gold Investors
Managing the tax on your gold investments is straightforward if you remember a few core principles. The tax you pay is fundamentally linked to how long you hold the asset and its form.
Here are the final takeaways on capital gain tax on gold:
The 36-Month Rule is Everything: The 3-year holding period is the bright line that separates lower, flat-rate long-term taxes from slab-rate short-term taxes.
Embrace Indexation for LTCG: For any gold held over three years, the indexation benefit is your best tool to reduce your taxable income by accounting for inflation.
SGBs Offer a Unique Exit: For long-term goals, the tax-free maturity of Sovereign Gold Bonds is a benefit no other form of gold investment provides.
Plan Ahead with Section 54F: If you plan to sell a large amount of gold, planning a reinvestment into a residential property can legally eliminate your entire LTCG tax liability.
Navigating tax laws can be tricky. For personalized advice on your specific situation and to ensure you file your ITR correctly, connect with a Taxbuddy expert today.
FAQs
1. What is the capital gain tax on gold in India for AY 2025-26?
The capital gain tax on gold depends on the holding period. For gold held less than 36 months (STCG), it's taxed at your income slab rate. For gold held more than 36 months (LTCG), it's taxed at 20% with indexation benefits.
2. Is there a tax on selling old family jewellery?
Yes, selling old family jewellery attracts capital gains tax. If held for more than 36 months, it's considered LTCG and taxed at 20% with indexation.
3. How is tax calculated on inherited gold?
When you sell inherited gold, the holding period and the purchase cost of the original owner are considered for calculating capital gains. You don't pay tax upon receiving it, only upon selling it.
4. Is GST applicable when I sell my old gold?
No, an individual selling old jewellery to a jeweller does not have to pay GST, as this is not considered a business activity. The jeweller, however, will levy GST when they sell new jewellery to you.
5. Do I need to declare gold holdings in my Income Tax Return (ITR)?
While you don't need to declare all gold holdings every year, you must report any income (capital gains) from selling gold in your ITR.
6. Is there any tax on Sovereign Gold Bonds (SGBs)?
Capital gains from SGBs are completely tax-exempt if you hold them until maturity (8 years). The interest earned annually is, however, taxable at your slab rate. If sold on an exchange before maturity, normal capital gains tax rules apply.
7. Can I offset capital gains from gold against other losses?
Yes, long-term capital losses can be set off against long-term capital gains. Similarly, short-term capital losses can be set off against short-term capital gains.
8. What is the TDS on the sale of gold jewellery?
There is no Tax Deducted at Source (TDS) on the sale of gold jewellery by an individual. It is the seller's responsibility to calculate and pay the applicable capital gains tax.
9. How is capital gain on digital gold taxed?
Capital gains on digital gold are taxed exactly like physical gold. The holding period of 36 months applies to determine if it's STCG or LTCG, with the same tax rates.
10. What happens if I don't reinvest the capital gains in a house within the time limit under Section 54F?
If you deposit the amount in the Capital Gains Account Scheme (CGAS) but fail to use it within the 3-year construction timeline, the unutilized amount will be taxed as a long-term capital gain in the year the period expires.
11. Is the tax different for gold coins vs. gold bars vs. jewellery?
No, the tax treatment is the same for all forms of physical gold, whether it's coins, bars, or jewellery. The rules are based on the holding period.
12. How do I find the purchase price of gold if I have no receipt?
If you don't have a receipt for inherited gold, you may need to get a valuation certificate from a registered valuer to determine the fair market value on the date of acquisition by the original owner or as on April 1, 2001, whichever is later.
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