Gold has always held a special place in Indian households — whether as a symbol of wealth, a secure asset, or a family tradition. But when it comes to taxation, not all forms of gold are treated equally. After the Union Budget 2024–25, which came into effect from July 23, 2024, some significant tax changes have impacted how your gold investments will be taxed — especially for long-term investors.
Let’s simplify the new rules for you and decode which type of gold investment saves the most tax.
Physical Gold Taxation (Jewellery, Coins, Bars)
When you invest in physical gold, such as jewellery, coins, or bars, it's treated as a capital asset.
- If sold within 2 years, any profit is treated as short-term capital gain (STCG) and is taxed as per your income slab.
- If sold after 2 years, it becomes a long-term capital gain (LTCG) & is taxed at 12.5% without indexation benefit.
However, storing and securing physical gold involves additional costs like locker charges, making it less efficient despite the tax benefits.
Digital Gold Taxation
Digital gold is gaining popularity due to its convenience. You buy and sell gold digitally via apps or fintech platforms.
But here's the catch after Budget 2024:
- Digital gold is now taxed like physical gold.
- LTCG is applicable after 3 years with 20% tax & indexation.
While digital gold offers easy access & liquidity, there’s no additional tax advantage over physical gold post this budget.
Gold Mutual Funds and Gold ETFs
Before the 2023 tax amendments, gold ETFs and mutual funds used to enjoy indexation benefits after 3 years. However, with the 2023 update (still applicable in Budget 2024), they no longer get the LTCG benefit.
Now, gains from gold mutual funds and ETFs are taxed as per your income slab — regardless of holding period. This makes them less tax-efficient than physical or digital gold in the long term.
Sovereign Gold Bonds (SGBs) – The Tax-Smart Option
SGBs are the most tax-efficient form of gold investment. Issued by the RBI, these bonds give you 2.5% annual interest & are backed by the Government of India."
Tax benefits include:
- No capital gains tax if held till maturity (8 years).
- If sold before maturity, indexation applies after 3 years.
- Interest income is taxable, but the capital gain on maturity is 100% tax-free!
For long-term investors, SGBs are now the most rewarding option post-Budget 2024.
Also Read: Sovereign Gold Bonds: What’s Holding Back New Tranches?
Quick Comparison of Gold Taxation in India (FY 2024–25)
|
Gold Type |
LTCG Holding Period |
Tax Rate |
Indexation |
Special Benefits |
|
Physical Gold |
3 years |
20% |
Yes |
Trusted asset, tangible |
|
Digital Gold |
3 years |
20% |
Yes |
Easy to buy/sell, but the same as physical |
|
Gold ETFs/Mutual Funds |
Any duration |
Slab Rate |
No |
Less tax-efficient post-2023 rules |
|
Sovereign Gold Bonds |
8 years (maturity) |
0% on maturity |
NA |
Interest taxable, but capital gain exempt |
Which Gold Investment Should You Choose Now?
- Looking for maximum tax benefits? Go with Sovereign Gold Bonds.
- Prefer liquidity with moderate tax? Choose physical or digital gold."
- If you’re investing via mutual funds, be aware of slab-based taxation with no indexation.
Tax planning should always align with your investment goal. If you're investing in gold just for 1–2 years, taxation may not make a big difference. But if you're in it for 5 years, tax-efficient routes like SGBs or physical gold with indexation will offer better post-tax returns.
Final Thoughts
After the Union Budget 2024, choosing the right form of gold investment is more important than ever. With clear tax implications on physical gold & digital gold in India, you can now make smarter decisions that protect both your wealth and returns.
For gold lovers and savvy investors alike, understanding gold taxation could be the difference between average and extraordinary returns.
Need help calculating taxes or choosing the right investment?
📞 Book a session with our expert on CallMyCA.com and get a personalised gold tax advisory today!
