Akshaya Tritiya 2022: Buying Gold? Know How Physical Gold, Digital Gold, Others are Taxed

Akshaya Tritiya 2022: Akshaya Tritiya in India is considered an auspicious day to buy and add gold to one’s investment portfolio, and with the day being just in the corner investors are looking to get hold of the precious metal. In the traditional Indian household, gold is still one of the best and safest investment to make, and for them physical gold is always the go-to option. However, there are other ways one can make a gold purchase this Akshaya Tritiya, for example gold bonds, gold ETFs or digital gold.

It must be noted that physical gold, gold bonds, gold ETFs or digital gold are taxed differently. But do you know how much tax to be paid for gold if you buy the asset? Read on to know.

Physical Gold Tax

Akshaya Tritiya 2022 falls on May 3, that is tomorrow, and will be a big day for Indians who want to buy gold. Physical gold, which is the most common form of gold, attracts a 3 per cent GST (Goods and Service Tax) at the time of buying.

Apart from this, physical gold also attracts taxes while selling. “Taxation of the physical form of gold (bullion, coins, jewellery) and digital gold (purchased online via e-wallets, brokers) depends on the holding period of the investment,” said Archit Gupta, founder and CEO of Clear.

“If you sell physical gold within three years of purchase, you incur short-term capital gains (STCG), which are taxable according to your income tax slab rates. However, selling such a form of gold after three years of investment shall be taxed at 20.8 per cent (including cess) with the indexation benefit,” he said.

Digital Gold Tax

“In the case of digital gold, there are no taxes for a holding of less than 3 years, in other words, there is no short term tax on digital gold,” said Vijay Singhania, chairman at TradeSmart.

Digital gold can be purchased vonia popular digital wallets including Paytm, Amazon Pay, Google Pay and PhonePe, with the price starting from as low as Rs 1. “But long term holding of digital gold is taxed similar to physical good, that is, a tax rate of 20 percent plus a 4 per cent cess above it,” said Singhania.

Tax on Gold ETFs and Sovereign Gold Bonds

There is another form of gold called paper gold, said Archit Gupta. Paper gold comprises Gold ETFs, Gold Mutual Funds and Sovereign Gold Bonds (SGBs). These forms of gold have become popular among investors over the last few years. But what is the gold tax in case of these categories?

Gold ETFs and Gold Mutual Funds are taxed similarly to physical or digital gold, Gupta explained to News18.com. “However, SGBs have different taxation rules. Half-yearly interest at 2.5 per cent p.a. from SGBs is taxable as income from other sources in the year of receipt,” he added.

In this regard, one must also note that Sovereign gold Bonds have a maturity period of eight years. “The capital gains are tax-free if the SGBs are redeemed on maturity. However, investors can prematurely redeem SGBs after five years. If SGBs are redeemed between five to eight years, the gains will be long-term capital gains and taxed at 20.8 per cent (including cess) with the indexation benefit,” said Gupta.

“Moreover, investors can buy and sell SGBs over the stock exchange. In such cases, if SGBs are sold before three years on the stock exchange, the capital gains shall be added to the investor’s income and taxed based on the applicable income tax slab rates,” he said.

“And in case the investors sell SGBs after three years over the stock exchange, it will be long-term capital gain and taxed at 20 per cent with indexation benefit,” added the Clear CEO.

Market experts, Gupta said, advise investors to have 5-10 per cent of their investment portfolio directed towards gold investments. So, Akshaya Tritiya 2022 is a good time to start the journey, now that you know everything about gold tax.

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