How is Profit on Sale of Gold Taxed in India?

Classroom

oi-Sunil

By Sunil Fernandes

Published: Thursday, October 30, 2014, 11:26 [IST]

Gold like many other capital assets attract a capital gains tax. If you have bought and sold gold at a profit you are liable to pay capital gains tax on the same.

How much capital gains tax is payable on gold?

How much tax is payable on the precious metal would depend on the holding period of it. For example, if you have bought and sold gold for a profit in three years time, short term capital gains would apply. The rate of tax would be at the normal rates that an individual is taxed on.

In case you have held gold for more than 3 years, then a capital gains tax of 20 per cent on the profits would apply. Say you have bought and sold gold for a profit of Rs 10,000, then you would have Rs 2000 to pay as taxes.

This is one reason why investing in gold is a hopeless proposition as all the profits would be eaten away by capital gains tax. It's therefore prudent to invest in gold ETFs where they are taxed like shares.

What about wealth tax on gold?

If the value of your gold exceed Rs 30 lakhs, you are liable to pay one per cent as wealth tax on the same. If there is an Income Tax raid and you have not paid wealth tax on the amount of gold and if the same is valued at more than Rs 30 lakhs, it's possible that here could be a seizure of the gold. Therefore, as a more prudent measure it is always useful to pay wealth tax.

Also, one must remember that if you are buying gold in excess of Rs 5 lakhs, the PAN card is a mandatory requirement.

Conclusion

Gold is a good investment, but one must remember that it attracts tax. This means that eats away substantially into your profits, which is why it not a lucrative investment. For example, if shares are sold at a profit after holding them for one year, they do not attract tax like gold, which makes them a tax efficient investment.

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