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A look at the tax implications for NRIs on Gold ETFs

A look at the tax implications for NRIs on Gold ETFs
Gold ETFs have emerged as an effective investment tool in short span of time not only to Indian investors but also for NRI investors. It offers a distinct advantage that was not available for investors in traditional investments such as Gold bars or Jewelry. The first and foremost advantage of investing in ETF is that you are tension free from risk of theft and insurance that is generally attached in investing in physical Gold. Secondly, it can be purchased in small quantities which start from a unit equivalent to 1 gram of gold. The investment amount is reduced significantly as one unit can be equivalent to Rs 3200 even if the current prices are considered to be at Rs 32000 per 10 gram. Impurity is another factor that is nullified when you invest in Gold ETF. Another advantage of holding ETF is that you are free from the liability of wealth tax.

Apart from Indian investors even the Non Resident Indians are now enjoying the fruits of investing in Gold ETF. NRI's only need to have Portfolio Investment Scheme (PINS) account in case of purchasing from exchanges or they can invest through Fund Houses but have to purchase in multiples of 1000 units.

Tax liability on NRI Gold ETF investment

Capital gains are charged on Gold jewelery, coins and bars at the time of selling. In case of selling before three year Short term capital gain tax is charged while in case of sale after three years long term capital gains tax is charged. Buyer of the physical gold more often than not is unaware of the Tax Deducted at Source (TDS) and therefore doesn't charge it and in such case it becomes the liability of the NRI seller to make payment of income tax.

Though investing in Gold ETFs attract taxes it is a very smart way to save taxes. The tax efficiency magnifies as in case of ETF investment, capital gains is considered long term only after one year which in case of jewellery, coins and bars are subject to long term capital gains benefit only after three years. Long term capital gains attract lower rate of taxes. NRI investor buys and sells Gold ETF through the stock exchange and therefore the TDS is not applicable, such NRI investor have to do a self assessment at the time of filing returns. In case of buying the ETF through a fund house, the TDS applicable is deducted on direct redemption.


Tax saving options on investing in Gold

Tax losses if booked in sale of Mutual Funds and shares can be siphoned off from tax gains of sale of gold. Important to note that any long term capital loss can only be set off from the long term capital gains and same is the case in short term capital loss. NRI that live in Middle East have the option of selling gold in their country. This is likely to exempt from paying income tax. Advantages of selling Gold in other countries like Middle East can also be considered. However in any case NRI should always remember import duties charged by the particular country of residence. Export duty from taking Gold out of India is Nil.


The sleepless nights you would have lived in case of physical gold has been done away with because of the advent of Gold ETFs. NRI that used to remain worried on wealth tax of holding physical Gold have now been benefited by Gold ETFs. It is a highly liquid form of investment and therefore tension of lower volumes doesn't hold ground here. NRI earlier remained worried about the purity of Gold held by them, now with Gold ETFs these problems have been totally resolved.

About the author:

Amit Sethi is an MBA (Fin) graduate and a Financial Consultant. He has spent 10 years in Equity research, Stock broking and Financial Consultancy Sector. He can be reached at

Read more about: gold etfs nris
Story first published: Saturday, February 2, 2013, 9:30 [IST]
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