Buying Gold In Dhanteras 2025? Know How Jewellery, Sovereign Gold Bonds, ETFs & Gold Mutual Funds Are Taxed

On October 18, 2025, Dhanteras, the most auspicious day to purchase gold, draws near, and millions of Indians are getting ready to invest in this traditional emblem of prosperity and wealth.

Gold prices have always been at their peak, putting forward almost 58% returns (INR) over the past 12 months. Despite the increase, India's love for gold shows no indication of slowing down, especially as the festive season arrives.

Compared to past years, the ways in which investors hand out money for gold have changed—from traditional physical holdings like jewellery, bars, and coins to other interesting ways such as Sovereign Gold Bonds (SGBs), Exchange-Traded Funds (ETFs), and gold mutual funds.

While gold remains an attractive asset for wealth preservation and diversification, investors should pay close attention to how profits from these investments are taxed. The taxation treatment depends primarily on the form of investment and the holding period.

According to Anita Basrur, Partner at Sudit K. Parekh & Co. LLP, "Many people may be looking at selling gold in such times when prices are high. However, it is important to note that the profits on the sale of gold, in any form, are taxable in India. The taxation of gold varies depending on how and how long it is held."

Physical Gold (Jewellery, Coins, Bars)

For physical gold, if sold within 24 months of purchase, the profit is treated as Short-Term Capital Gains (STCG) and added to your total income, taxed as per your income tax slab. If held for more than 24 months, it qualifies as Long-Term Capital Gains (LTCG) and is taxed at 12.5% without indexation benefit, as per the new regime effective July 23, 2024.

Investors are advised to maintain proper purchase invoices and cost proofs to avoid hurdles during tax assessments.

Sovereign Gold Bonds (SGBs)

SGBs, issued by the Reserve Bank of India (RBI), have become a preferred alternative to physical gold due to their dual benefit—2.5% annual interest and potential capital appreciation.

The interest income is taxable at the investor's slab rate. However, capital gains upon redemption at maturity (after 8 years) or during an RBI buyback are completely tax-free.

If the investor sells SGBs on the stock exchange before redemption, taxation depends on the holding period. Holdings up to 12 months are taxed at slab rates as STCG, while those exceeding 12 months are taxed at 12.5% LTCG, without indexation. This makes SGBs one of the most tax-efficient gold investments when held to maturity.

Gold ETFs

Gold ETFs are listed financial instruments that track gold prices and can be traded easily on the stock exchange. For tax purposes, ETFs held for 12 months or less are treated as STCG and taxed at slab rates, while those held for more than 12 months qualify as LTCG, taxed at 12.5% without indexation.

Gold Mutual Funds (Gold FoFs)

Gold mutual funds, or gold fund of funds, invest in gold ETFs. These are unlisted units, and therefore, the holding period criteria differ slightly. Units held for less than 2 years are taxed at slab rates as STCG, while those held for more than 24 months are taxed as LTCG at 12.5%, without indexation benefits.

As Nitya Shah, Investment Manager at smallcase and Co-Founder at KamayaKya, explains, "Older sales (before July 23, 2024) and certain legacy holdings can still be taxed under the earlier rules, such as 20% with indexation. When in doubt, investors should check their purchase dates and keep proof of cost to ensure correct taxation."

Conclusion

Gold remains an important investment commodity for Indian households. However, understanding its tax implications is crucial to increase returns and secure compliance. With the 12.5% LTCG rate now standard for most forms of gold investments, the structure has become simpler—but investors should remain clear in mind that indexation advantages no longer apply. Proper recordkeeping and awareness of holding periods will help ensure that investors' golden gains don't lose their shine to unexpected tax liabilities.