Investing in gold bonds, ETFs or assets? Here's how you will be taxed in FY25
There is no doubt that investment in gold has never faded away despite the good performance of other asset classes. Since February, gold has demonstrated a remarkable yield of approximately 17 per cent. Correspondingly, the commodity's value has reached unprecedented levels daily in both domestic and global markets, despite an ascent in US Treasury yields. Gold futures trading on the Multi Commodity Exchange (MCX) sustained their rally on Tuesday, peaking at Rs 71,150 per 10 grams as of April 9th, 2024.
In line with this trend, international figures reflected a new record high for the precious metal for seven consecutive sessions; it continues to trade around these peak values today. This surge is primarily attributed to a climb in ten-year treasury yields - a first since November of last year due largely to optimistic market sentiment following China’s central bank's decision to augment its gold reserves throughout March.
An analytical retrospective of gold returns over the past 20 years reveals a substantial growth rate of nearly 1,150%. This precious asset has incrementally realized an impressive 161% escalation during the last decade and a surge of around 123% in the most recent five-year period. Moreover, within the scope of the preceding year alone, this valuable commodity has provided significant yield equivalent to approximately 17.44%.
So, when comes to investing in gold, there are many ways to do so. Sovereign Gold Bonds, Gold ETFS, gold stocks are some of the popular ways of investment in the yellow metal.
It is imperative to underscore that the taxation policy applied to both digital and physical gold remains fundamentally consistent, with sovereign gold bonds (SGBs) being a notable exception in this regard.
SGBs
The Centre introduced the Sovereign Gold Bond (SGB) scheme in November 2015 to offer an alternative investment to physical gold. Over the years, the market has witnessed a considerable decline in the demand for physical gold. SGBs are government securities and are considered safe. Their value is denominated in multiples of grams of gold
There are no tax deduction benefits for the lump sum deposit of SGBs under Section 80C of the Income Tax Act. The interest given on SGB deposits is also not tax-free. The interest amount must be declared under ‘Income from Other Sources’ during tax returns. The income tax will be as per the individual’s income tax slab. Tax Deducted at Source (TDS) is not applicable on SGBs. However, they are exempt from capital gains tax when held till maturity.
Gold ETFs
As per new norms, gold
ETF and units of gold Saving Funds bought till March 31, 2023, were treated and
taxed like physical gold and become long-term capital assets if held for 36
months or more.
After March 31, 2023, the units are taxed as short-term capital gains
regardless of how long you hold it. Taxation occurs upon sale or redemption. It
is to be noted that the units are taxed at slab rates.
Physical gold (coins and biscuits)
According to the Income Tax Act, selling physical gold incurs a tax of 20%, along with a 4% cess on long-term capital gains (LTCG). A supplementary cess of 8 per cent is levied upon the sale of the item three years post-purchase. Conversely, if disposed within a span of 3 years from acquisition, the gains are incorporated into your income and subsequently taxed as per your applicable tax bracket.
Compared to traditional jewellery items, this option proves more economical due to its exclusion of craftsmanship charges. However, it's pertinent to note that these articles demand secure storage provisions; thus potentially incurring associated costs such as locker fees.
Gold jewellery
Capital gain tax is applicable on the sale of jewellery or gold. If an investor has held the gold for more than 3 years, then it will be considered as long term and tax @ 20% will be applicable after indexation. For short term capital gain individuals’ slab rate will be applicable.
Source: https://www.businesstoday.in/