GOLD has been an excellent investment for Indians; its value in Delhi rose from Rs 49,820 per 10 grams on December 16, 2021, to Rs 55,565 on December 16, 2022 – a rise of 11.53 per cent – and faces less turbulence than investing in the stock market.
Several people keep gold in their houses themselves for safekeeping as gold is often used in jewellery.
Taxation
The last change in rules regarding the yellow metal happened through the Taxation Laws (Second Amendment) Bill, 2016. The Central Board of Direct Taxes states, “It is clarified that the jewellery/gold purchased out of disclosed income or out of exempted income like agricultural income or out of reasonable household savings or legally inherited which has been acquired out of explained sources is neither chargeable to tax under the existing provisions nor under the proposed amended provisions.”
Read More: Budget 2023 Expectations: Income Tax Relief For Salaried Individuals, Section 80C Limit Tweak Likely
This means that if your gold or jewellery has been bought from sources that have been disclosed at the time of filing tax returns, there is no additional levy on holding the assets, even if they are kept at home.
On the other hand, there is a prescribed limit should the gold be bought from unexplained sources. It allows leeway “to the extent of 500 grams per married lady” and “250 grams per unmarried lady.” For a male member of a household, an exemption to the tune of 100 grams is made.
Selling gold
Should you decide to sell gold within three years of purchasing it, the gain is added to your income and taxed as per the applicable tax slab.
But, if the gold in question has been in your possession for more than three years, income arising from the sale will be subject to Long-term Capital Gains Tax (LTCG), which is 20 per cent with an indexation benefit.
This means that a new calculation will be made for the assets, after factoring in inflation. Suppose, you have purchased gold worth Rs 100 and held on to it for five years; in the same period, the average inflation rate has been 10 per cent. Now, you decide to sell the gold for Rs 200, gaining Rs 100 in the process. This gain is going to be taxable after accounting for inflation, which would peg the new value of the gold at Rs 150.
Read More: Number of subscribers for Atal Pension Yojana crosses 48 mn mark
Now, since your gain after adjusting for inflation is Rs 50, you will be taxed 20 per cent of this income, namely, Rs 10. You will be left with a net gain of Rs 40 on the gold.
Sovereign Gold Bonds
Regarding the sale of Sovereign Gold Bonds (SGB), the gains will be added to your income and then taxed as per chosen tax slab.
When SGBs are sold after three years of holding them, then the gains will be taxed at the rate of 20 per cent with indexation and 10 per cent without indexation. If the bond is held till maturity, no tax will be levied on the gains.
