If you are buying and selling gold in any form this Diwali, it is important to know the new income tax rules for caudal gains on gold. Here's a look at the taxes you pay when buying gold in different forms this Diwali.
gold jewelry
Gold jewelry can be purchased in the form of necklaces, earrings, rings, and so on. When you buy gold jewellery, you have to pay Goods and Services Tax (GST) at 3%. GST is levied on gold jewelery prices plus manufacturing charges. There is no income tax on the purchase of gold jewelry.
If you exchange your old gold jewelry for new ones, an exchange of old gold jewelry will be considered a sale of old gold. Hacienda gains tax rules will apply to the sale of antique gold jewellery.
As per the new income tax rules, caudal gains will be long-term caudal gains (LTCG) if antique gold jewelery is sold after keeping it for two years. The LTCG tax rate of 12.5% will apply. However, this will not get you any indexing benefits.
If antique gold jewelery is sold before two years from the date of purchase, the gains will be considered short-term caudal gains (STCG). STCG will be subject to tax according to the income tax slabs applicable to its income.
digital gold
Naveen Wadhwa, vice president of research and advisory at Taxmann.com, says: “The income tax laws on buying and selling digital gold are the same as those for physical gold.”
Gold Mutual Funds and Gold Exchange Traded Funds (ETFs)
Wadhwa says, “The new caudal gains tax rules will apply to gold mutual funds and gold ETFs from April 1, 2025. Until March 31, 2025, the old caudal gains tax rules Hacienda gains will be applied to the purchase and sale of gold mutual funds and gold ETFs. “
This is because the government has changed the definition of debt mutual funds. The new definition will come into effect from April 1, 2025. Currently, the specified debt mutual fund is defined as a mutual fund in which not more than 35% of its total income is invested in shares of domestic companies.
Under the amended definition, a mutual fund is classified as a debt mutual fund that invests more than 65% of its total income in debt and money market instruments or a fund of funds whose underlying has a comparable debt investment mix.
Under the old caudal gains tax rules, caudal gains from the sale of gold mutual funds and gold ETFs will be considered STCG. Hacienda gains will be taxed according to the income tax tables applicable to your income.
Wadhwa explains the new caudal gains tax rules that will apply from April 1, 2025:
Gold Mutual Fund: Proceeds will be considered STCG if sold within 24 months from the date of investment. STCG will be taxed according to the income tax slabs applicable to its income.
If the gold mutual fund is sold after 24 months have elapsed from the date of investment, the profits will be known as LTCG. The LTCG will be taxed at 12.5% without indexation benefit.
Gold ETFs: For listed gold ETFs, gains will be considered STCG if sold before the 12 months are completed. STCG will be taxed according to the income tax slabs applicable to its income.
If the listed gold ETF is sold after 12 months, the profits will be considered LTCG. LTCG will be taxed at 12.5% without indexation benefit.
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