How Are Gold ETFs Taxed In India?

If you had to invest in any form of gold in the last one year, you would have probably come out with superb returns.

Now, everyone knows you cannot escape taxes. When you make a profit on shares, gold, debt instruments and even real estate, you better pay off capital gains tax.

Taxation on Gold ETFs

Gold ETFs are taxed in the same way as physical gold. First let us understand a little on Gold ETFs, before we understand how they are taxed. As an investment Gold ETFs are much better than physical gold.

This is because you do not have to incur storage charges, nor are there worries of theft. They are also very liquid and easy to sell , since they are in the electronic form. If you sell gold jewelery, you will end-up losing on making charges.

Now, let us understand how taxes are applicable to Gold ETFs. When you buy Gold ETFs and sell it at a profit, you have to pay capital gains tax.

No matter, how long you have held it for, capital gains tax is applicable on Gold ETFs sold at a profit.

There are two types of taxes that would be applicable. First is the long term capital gains tax on Gold ETFs. Here long term capital gains is over and above 36 months.

So, if you have sold gold ETFs at a profit and that too after three years, the long term capital gains tax of 20 per cent with indexation becomes applicable.

Gold ETFs attract a short term capital gains tax as per your current tax slab.

Check gold rates in all Indian cities here

Is taxation on gold ETFs and physical gold the same?

You can easily convert your Gold ETFs to physical gold. For example, Motilal Oswal Most Gold ETFs allows you to convert ETFs up to 1 KG of gold. Thus this mean that you escape tax. The answer is no.

Physical gold and gold ETFs are taxed in a similar manner. So, no matter if you move from Gold ETFs to physical gold and vice versa the tax implications will remain the same.

Cannot escape capital gains tax on gold

In real estate, if you have sold a property and made profit, if you buy another house, you can easily avoid paying capital gains tax. That does not happen in the case of Gold ETFs. You will end-up paying tax no matter what.
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One important thing that we need to mention to our readers is that there is also wealth tax in gold. So, if your gold and gold jewelery value if more than Rs 30 lakhs, you need to pay wealth tax in the same.

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