Income Tax Calculator: How Are Different Forms of Gold Investments Taxed?

Income tax calculator: Investing in gold is considered to bode well for Akshaya Tritiya. Today, there are different forms of the yellow metal that an investor looks at when making an investment decision. These forms are physical gold, paper gold and electronic gold. Physical gold is a traditional form of gold investment while paper gold and electronic gold are new forms of precious metal investment.

Physical gold income tax rule

Speaking on the physical gold income tax rule, Archit Gupta, Founder and CEO of Clear, said: “Investments in gold are categorized as physical gold, digital gold and paper gold. Taxation of physical gold, like jewelry and coins, depends on ownership For example, if you sell physical gold within three years of purchase, you realize capital gains at short-term capital gains (STCG).Short-term capital gains are added to your total taxable income and taxed according to your income tax bracket. after three years are taxed at 20.8% (cess included) with the advantage of indexation.

How investing in digital gold is taxed

“Digital gold is taxed at the same rate as physical gold and depends on the period of holding. Capital gains on digital gold held for less than three years are taxable at the applicable rates of income tax. However, long-term capital gains tax is applicable on the sale of digital gold after three years at 20.8% (including cess) with the benefit of indexation. Indexation allows taxpayers to recalculate the purchase price of the investment after adjusting for inflation, thereby reducing tax expenditures,” said Archit Gupta of Clear.

Paper gold income tax rule

Paper gold includes gold ETFs, gold mutual funds, and gold sovereign bonds (SGBs). Gold ETFs and mutual funds are taxed the same as physical gold. However, SGBs have different taxation rules.

“Investors receive interest from SGBs at 2.5% per annum, which is added to the investor’s taxable income and taxed according to the applicable income tax bracket. SGBs have an eight-year maturity. Capital gains realized on SGBs, if held to maturity, are tax exempt,” said Archit Gupta.

However, investors can prematurely redeem SGBs after five years. If you redeem SGBs between five and eight years, the gains are considered long-term capital gains. It is taxed at 20.8% (cess included) with the benefit of indexation.

Investors can buy and sell SGBs on the stock exchange. If the SGBs are sold before three years, the capital gains are added to the investor’s income and taxed according to the applicable income tax bracket. In addition, capital gains realized by investors when selling SGB on the stock exchange after three years are long-term and taxed at 20% with indexation benefit.

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