How Gold Is Taxed in India
Gold is taxed under the head "Capital Gains" in your income tax return when you sell it for a profit. The exact rate depends on three factors: which form of gold you owned, how long you held it, and when you bought it. The 2024 Union Budget rewrote several rules, and the simplified regime applies to FY 2025-26 (AY 2026-27).
This guide walks through each gold form — physical jewellery, gold coins/bars, Gold ETFs, Gold Mutual Funds, Sovereign Gold Bonds, and digital gold — with current rules and worked examples.
Quick Reference Table — Gold Tax Rules FY 2025-26
| Gold Form | Short-Term | Long-Term | Holding Period for LTCG |
|---|---|---|---|
| Physical gold (jewellery, coins) | Slab rate | 12.5% no indexation | 24 months |
| Gold ETF (bought after 1 Apr 2023) | Slab rate | Slab rate (no LTCG) | NA |
| Gold ETF (bought before 1 Apr 2023) | Slab rate | 12.5% no indexation | 12 months |
| Gold Mutual Fund (bought after 1 Apr 2023) | Slab rate | Slab rate | NA |
| SGB (held to maturity) | NA | Tax-free | 8 years |
| SGB (RBI buyback year 5+) | NA | Tax-free | NA |
| SGB (sold on exchange) | Slab rate | 12.5% no indexation | 12 months |
| Digital gold | Slab rate | 12.5% no indexation | 24 months |
Physical Gold — Jewellery, Coins, Bars
If you sell physical gold within 24 months of purchase, the entire profit is added to your income and taxed at your slab rate (potentially 30%+ if you are in the top bracket).
If you sell after 24 months, the profit is treated as a long-term capital gain and taxed at 12.5% — without indexation benefit (post-2024 Budget rule). The Rs 1.25 lakh annual exemption that applies to equity does not apply to gold.
Worked Example — Physical Gold LTCG
You bought a gold coin in April 2020 for Rs 50,000. You sell it in June 2025 for Rs 90,000.
- Holding period = 5 years 2 months → Long-term.
- Capital gain = Rs 90,000 - Rs 50,000 = Rs 40,000.
- Tax = 12.5% × Rs 40,000 = Rs 5,000.
- Plus applicable cess of 4% on tax → Rs 200.
- Total tax = Rs 5,200.
The old indexation benefit (which would have reduced the taxable gain) is gone for sales on or after 23 July 2024. The flat 12.5% rate is simpler but generally less favourable for assets held a long time with modest appreciation.
Special Rule — Pre-July 2024 Purchase Grandfather Clause
For physical gold purchased before 23 July 2024 and sold after that date, taxpayers can choose either of two options:
- 12.5% LTCG without indexation, or
- 20% LTCG with indexation (using the old rules).
Use whichever gives lower tax. Most older holdings with significant inflation between purchase and sale benefit from option 2.
Gold ETFs and Gold Mutual Funds
For Gold ETFs and Gold Mutual Funds purchased on or after 1 April 2023, the rules are simple — and harsh:
- All gains taxed at slab rate, regardless of holding period.
- No LTCG benefit even after years of holding.
- No indexation.
This is the same treatment as debt mutual funds post-2023. The intent was to remove the tax arbitrage that paper-gold investors enjoyed over physical-gold investors.
For Gold ETFs and Mutual Funds purchased before 1 April 2023, the old rules apply — 20% LTCG with indexation if held 36+ months. Sales between 23 July 2024 and 31 March 2025 used a 12-month holding period for LTCG eligibility. Many old purchases still qualify for indexation under the grandfather clause.
Worked Example — Gold ETF Post-April 2023
You bought 50 units of Nippon Gold BeES at Rs 50 per unit in May 2023 for Rs 2,500. You sell in May 2026 at Rs 90 per unit for Rs 4,500.
- Holding period = 3 years → would have been long-term under old rules.
- Capital gain = Rs 4,500 - Rs 2,500 = Rs 2,000.
- Since bought post-April 2023, gain is added to slab income.
- If you are in the 30% slab, tax = Rs 600 (plus cess).
Sovereign Gold Bond — The Tax Champion
SGBs are the most tax-efficient gold investment in India:
-
Held to maturity (8 years): Capital gains are 100% tax-free. The 2.5% annual interest is taxable at slab rate (added to "income from other sources").
-
Redeemed via RBI buyback from year 5: Capital gains are 100% tax-free.
-
Sold on stock exchange: Standard short-term (slab) or long-term (12.5% no indexation, after 12 months) rules apply.
Worked Example — SGB to Maturity
You invested Rs 50,000 in SGBs in November 2017 (10 grams at Rs 5,000/g). In November 2025 at maturity, gold price is Rs 9,500/g. You receive Rs 95,000.
- Capital gain = Rs 95,000 - Rs 50,000 = Rs 45,000 → Completely tax-free.
- Plus 8 years of 2.5% interest on Rs 50,000 = Rs 1,250/year × 8 = Rs 10,000 → Added to other income each year, taxed at slab rate.
This tax exemption is one of the strongest cases for SGBs over Gold ETFs for long-term investors.
Digital Gold
Digital gold (Paytm Gold, PhonePe Gold, Tanishq Digital Gold, etc.) is taxed exactly like physical gold:
- Under 24 months holding: Short-term, slab rate.
- Over 24 months holding: Long-term, 12.5% no indexation.
The 3% GST you paid at the time of purchase is not refundable on sale and cannot be added to your cost of acquisition for capital gains purposes.
How to Report Gold Capital Gains in ITR
Gold capital gains are reported in ITR-2 (or ITR-3 for those with business income):
- Schedule CG — Capital Gains section.
- Show purchase date, sale date, sale value, cost of acquisition, holding period.
- Choose the right sub-section: physical gold under "Other than equity", SGBs/ETFs in their respective lines.
If you held gold for less than 24 months and have STCG, report under "Short-term capital gains".
Tax-deduction on purchase cost: Original purchase invoice, jeweller bill, demat statement, RBI SGB allotment letter, or platform statement — keep all proof for 7 years.
Set-Off and Carry-Forward
- STCG on gold can be set off against any capital loss (short or long term) in the same year.
- LTCG on gold can be set off only against LTCG from other assets.
- Net capital loss can be carried forward 8 years and set off against future capital gains.
Common Tax Mistakes
- Not reporting jewellery sales. Selling old family gold is taxable if it was acquired more than 24 months ago. You can take 1 April 2001 fair market value as cost for inherited gold.
- Forgetting GST on digital gold. GST is not refundable and cannot be claimed as a deduction.
- Wrong holding period on ETF post-April 2023. No LTCG benefit applies — all gains are slab rate.
- Ignoring SGB interest. The 2.5% interest is taxable income even though capital gains are exempt at maturity.
Tax-Optimal Gold Strategy
If tax efficiency is a priority and you have an 8+ year horizon, Sovereign Gold Bonds beat every other form of gold by a wide margin. For shorter horizons or active trading, Gold ETFs are convenient but tax-inefficient post-April 2023. Physical gold (jewellery and coins) sits in the middle — slightly better LTCG treatment than ETFs after 24 months, but burdened by GST and making charges at purchase.
Key Takeaways
- Physical gold: 12.5% LTCG (no indexation) after 24 months; slab rate before.
- Gold ETF/Mutual Fund post-April 2023: always slab rate, no LTCG benefit.
- SGB held to maturity: completely tax-free; 2.5% interest is taxable income.
- Digital gold: taxed like physical gold; 3% GST is not refundable.
- For inherited gold, use 1 April 2001 FMV as cost.
- Grandfather clause exists for pre-July 2024 purchases — can choose between 12.5% no indexation or 20% with indexation.
For related reading, see Gold ETF vs Gold Mutual Fund vs SGB comparison and Sovereign Gold Bonds complete guide.
Disclaimer: This article is published by ipomarket.in for educational and informational purposes only. It does not constitute investment advice, a recommendation to buy or sell any security, or an offer to invest. Past performance is not indicative of future results. Tax rules and interest rates change frequently — verify current figures with official sources or a SEBI-registered financial advisor before acting. ipomarket.in is not a SEBI-registered investment advisor or research analyst.