INSIGHT OF TAX ON GOLD IN INDIA
Holding gold is ritual for Indians and Indian have the regular habit of buying and gifting the Gold to relatives and friends. Among popular low risk investment gold always gives higher assured returns as compare to any other investments.
Implementation of Income Tax on Gold:–
Section 2 (14) of the Income Tax Act, 1961 provides the definition of Capital Asset means property of any kind held by an assessee, whether or not connected with business or profession.
This definition is important to tax the gold as first gold must be a capital asset to attract income tax either LTCG1 or STCG2.
As we all aware of the fact that The Income Tax Act, 1961 is amended every year as part of implementation of new finance bill provisions passed In February. Since 1961 to 1971, for this first 10 years Income Tax Act exclude the gold jewellery of personal effect from being assessed under the law.
In short, Tax on Gold in India being started under Income Tax from 01.04.1972. (View based on study)
HISTORY AND HABIT OF INDIANS
Kings ruling Era in Indian has the obsession’s of Gold Jewellery as status symbol. Indians are spend half of their earnings in just buying gold and gold ornaments for personal use. Some also wearing gold ornament due to health benefits belief.
After 20th century Gold Jewellery is not an obsession for Indians but they buy gold as Safest Investment for emergency use. To gift Gold on the occasion of Marriage etc.
HISTORY OF TAX ON GOLD
Kings collect taxes in form of gold and grains as per the classes of people and earing of that individual. Business and occupation also keep in view before taxing individual.
Britisher and Mughal rulers also collect gold coins / preciouses stones from the Indian as Lagan/ Kar/ Taxes based on wealth of that individual.
Since 1972, Indian Government was imposed the Personal Income Tax on gold and gold jewellery even holding for person use and sell it to others. TDS is also one another type of Personal Tax on Gold Buying.
To fulfil the huge demand of gold in India, Government of India needs to regulate Import of Gold and as part of this impose Import Duty on gold in any form imported in Indian Land.
AIDC3 is also collected by Indian Government and utilize reserve fund for the Development and Awareness in Agriculture Sector.
Recently Since 2017 Government of India regulate GST4 as indirect tax levy on sale of gold by traders. Also implement GST on making charges of Gold Jewellery and Coins etc.
Capital Gain Tax and TDS (under Income tax), GST, Custom Duty, AIDC are the primary taxes and duties collected by GOI from End Consumer.
MODE OF GOLD HOLDING & INCOME TAX APPLICABILITY
In India you can either hold Gold Physically or Buying it digitally and issuer store it in vaults on your behalf.
In both case STCG tax on gold is applied as per applicable slab rate as decided in finance bill for said year.
LTCG is applied at the rate of 20% and plus additional 4% Cess is applicable. Aggregate tax rate is 20.8%
You can also hold the Gold in Paper Mode via Certificate issued by RBI. Which is also known as Sovereign Gold Bond.
Resident Indian can Hold gold Physically or/and Digitally or/and in Paper Mode.
TAX ON GOLD UNDER GST
- Incase of Imports : GST rate on import of Gold is 3%. So if you import gold worth rupee 100000 you have to pay rupee 3000 (3% of rupee 100000) extra.
- Incase of Trading : GST rate on selling of gold by Jewellers and Traders is 3%. You have to pay 3% on physical buying of gold from Traders/Jewellers. So if you buying 10 gram of gold coin worth Rupee 70000, than you have to pay rupee 2100 (3% of rupee 70000) extra.
- Incase of Customize or Ready to wear Ornaments and Gold Coins: In addition to gold for ornaments you have to pay additional making charges above the value of gold. Makers charge the money as per the complexity of design. On value of Gold GST rate is 3%. However on making charges Tax rate is 5%. For example if buy Wedding ring for your loved once having value marked rupee 105250. Value of gold rupee 100000(Incl. 3% GST) plus Making Charges rupee 5000 plus GST on Making charges rupee 250 (5% of rupee 5000) extra.
GST on gold trading and importing is 3%. Additional 5% GST on Making Value of gold ornaments/coin.
IMPORT DUTY / TAX ON GOLD
To regulate gold prices from manipulation and irregularities in gold market Government of India implement policy and process for import of GOLD.
Due to extremes demand of Gold and less availability of natural gold mines India needs to import the gold from outside. As and when gold is imported into India attracts Import Duty Levy.
Recently GOI5 reduce the custom duty on gold from 12.5% to 10%. So new Custom Duty rate is 10%. For all import transaction additional 3 % GST is also applied above custom duty. If you importing Value of gold rupee 100000 you have to pay extra rupee 10000 ( 10% of rupee 100000) as custom duty and rupee 3000 (3% of rupee 100000) GST on Import. Total payment is rupee 113000.
New Import Duty Rate on Gold Bars is 10%. (September 2023)
HOW MUCH TAX DO I PAY AT A TIME OF GOLD PURCHASE?
ANSWER : You can buy physical gold after paying 3% GST on value of gold and 5% GST on making charges. If you buy physical gold above rupee 100000 than you have to pay 1% TDS6 on gold value in addition to GST.
IS BUYING AND SELLING GOLD ORNAMENTS/ COINS/ BUISCUITS/ BARS TAXABLE IN INDIA?
ANSWER: YES.
HOW MUCH GOLD ONE CAN KEEP WITH OUT BILLING AND DOCUMENTS?
ANSWER: 155 TOLAS (APPROX) PER FAMILY. Married woman allowed up to 500 Gram. Unmarried woman allowed 250 grams. Men allowed upto 100 grams. ( This limit applied for every one and per person in family)
IS TAX ON GOLD IN CASE OF INHERITANCE APPLIED ?
ANSWER: No., Indians resident do not liable to pay any capital gain tax on gold received in case of Inheritance.
WHAT IS CORRECT GST RATE FOR Gold 3% or 12% ?
ANSWER: 3% is correct GST Rate.
CAN GST ON GOLD ALLOWED AS CLAIM OF CREDIT ?
ANSWER: Register Traders allowed Claim of GST Credit against Sale.
WHAT IS DIGITAL GOLD, TAX ON DIGITAL GOLD ?
ANSWER: SEBI7 and RBI8 issue guideline and process for issuance of Digital Gold. Digital Gold is having same feature and value of physical gold but it is stored in vault of the issuer. Investor have benefits that GST and Making charges not applicable on Digital Gold.
STCG on Digital gold is applied as per the slab rate after deducting the investment/purchase cost if sold before expiry of 36 months.
If sold after expiry of 36 months LTCG tax on gold is attracted 20% tax and 4% cess on tax aggregating 20.8% after deducting Index cost of acquisition of gold to adjust inflationary effect.
To plan investment in Bonds like National highway Authorities of India Bonds and REC’s to either reduce and/or cut down the tax liability to the extent of investment.
WHAT IS PHYSICAL GOLD, TAX ON PHYSICAL GOLD ?
Traditional method of buying gold and keep it into safe custody. Gold Coins , Ornaments, Bars are the example of physical gold. If you invest in physical gold you have to bear additional GST and TDS liabilty.
STCG on Digital gold is applied as per the slab rate after deducting the investment/purchase cost if sold before expiry of 36 months.
If sold after expiry of 36 months LTCG tax on gold is attracted 20% tax and 4% cess on tax aggregating 20.8% after deducting Index cost of acquisition of gold to adjust inflationary effect.
To plan investment in Bonds like National highway Authorities of India Bonds and REC’s to either reduce and/or cut down the tax liability to the extent of investment.
WHAT IS PAPER GOLD,TAX ON PAPER GOLD?
ANSWER: SEBI7 and RBI8 issue guideline and process for issuance of Digital Gold. Digital Gold is having same feature and value of physical gold but it is stored in vault of the issuer. Investor have benefits that GST and Making charges not applicable on Digital Gold. Recently RBI issued Sovereign Gold Bond is perfect example of Paper Gold. You can redeem it after expiry of term and maturity is exempt.
However if you need money and apply for premature of your bonds you have to liable to pay taxes. you can also trade this Bonds on Stock Markets.
STCG on Digital gold is applied as per the slab rate after deducting the investment/purchase cost if sold before expiry of 36 months.
If sold after expiry of 36 months LTCG tax on gold is attracted 20% tax and 4% cess on tax aggregating 20.8% after deducting Index cost of acquisition of gold to adjust inflationary effect.
To plan investment in Bonds like National highway Authorities of India Bonds and REC’s to either reduce and/or cut down the tax liability to the extent of investment.
WHAT IS LTCG TAX ON GOLD?
ANSWER : If you hold gold more than 36 months than Long term capital gain tax 20.8% is applied on sell of gold. However you can take benefit of Index Cost for inflation adjustment and Plan your proceeds to save tax by investing it in bonds.
WHAT IS STCG TAX ON GOLD?
ANSWER: If you hold gold less than 36 months than Short term capital gain tax is applied on sell of gold. Benefit of Indexation and Invest in Bond Not applicable in STCG case. However you can deduct purchase cost of acquisition to compute gain. STCG attract tax as per the applicable Slab Rate.
TAX ON GOLD RECEIVED ON A OCCASION OF MARRAIGE ?
ANSWER: No. Tax Liability does not arise in case of Gold received on occasion of Marriage.
TAX ON GOLD RECEIVED AS A GIFT ?
ANSWER: Tax is not applicable if Gift received from Relative11. ( as per section 56(2) of Income Tax Act,1961) Gift received from person otherwise than relative and value of gift exceeds rupee 50000, such income taxable in the hand of recipient as Income from Other Sources.
TAX ON GOLD RECEIVED AS SALES COMMISSION?
ANSWER: If you received in capacity of employee than that gold must be treated as either Commission Income or Salary. it is taxable in the hands of recipient.
TAX ON GOLD RECEIVED AS PART OF SALARY/ BONUS ?
ANSWER: If you received either in cash or in kind. Gold received as salary / bonus must be added to the salary income of employee and taxed in the hand of employee. Employer also consider value of gold as part of salary. Tax is applicable as per applicable slab rate.
FINE ON ILLEGAL GOLD HOLDING IN INDIA / AT PORT / AT AIRPORT
ANSWER: If you do not prove the ownership and tax paid gold holding in your possession it need to seized by respective authority and you shall be liable to lawful action like monetary fine and payment of pending tax dues with interest and penalty. Individual Indian does not own Gold bars he/she must convert it into gold ornaments before 1962.
If officer found gold with any person with above the applicable allowable limit and with out have proper documents then they will impose legal action against person holding Gold.
TAX ON GOLD EXCHANGE WITH EITHER GOLD / ORNAMENTS / COINS :
ANSWER: Exchange of gold does not arise any additional tax liability for taxpayer.
INCOME TAX ON GOLD DERIVATIVES:
ANSWER: For Derivatives every transaction take place based on the concept of underlying assets. For Gold derivative , GOLD it self is the under lying assets. All the income from derivative transaction is not a capital gain and hence tax is applicable as per applicable slab rate and not as per LTCG or STCG. You have to prepare your profit and loss account and file your return.
INCOME TAX ON GOLD IN CASE OF NRI’S:
ANSWER: Applicable tax rates are same for NRI as applicable to resident Indian. However NRI can invest in gold in India in all modes otherwise than Sovereign Gold Bond. Tax rates for Gold ETF is 30% at time of redemption and 20% on LTCG. TDS provision is also applicable based on the nature of transaction and remittance destination is India or not.
Through this blog we provide the Information about tax on gold and related FAQS for you reference.
For any query and suggestion post your comment.
- LTCG: Long Term Capital Gain ↩︎
- STCG: Short Term Capital Gain ↩︎
- AIDC: Agriculture Infrastructure Development Cess ↩︎
- GST: Goods and Services Tax ↩︎
- GOI: Government of India. ↩︎
- TDS: Tax Deducted at Source( means withh ↩︎
- SEBI: Securities and Exchange Board of India. ↩︎
- RBI: Reserve Bank of India (Central Bank) ↩︎
- SEBI: Securities and Exchange Board of India. ↩︎
- RBI: Reserve Bank of India (Central Bank) ↩︎
- Relative means definition as per Income Tax Act, 1961. ↩︎
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