We Indians hold gold in some form or the other. As per statistics by the World Gold Council (2019), households in India have stocked up gold weighing more than 25,000 tonnes. We also hold silver in the form of idols, utensils, coins and jewellery. But, did you know that there is an applicable sales tax on gold and silver by the state governments?
Let’s understand the sales tax on gold and silver.
When purchasing gold coins or jewellery, the bill consists of three components:
As of July 2022, the GST rate in India is 3% on the gold price and 5% on the making charges.
When selling gold jewellery, you need to consider:
The tax amount depends on how long you have held the gold. If sold within three years, STCG tax applies. If held for more than three years, LTCG tax at a rate of 20.8% (including cess) is applicable. However, purchasing gold allows for indexation benefits.
You can buy gold without GST and the making charges by investing in its dematerialised form. Four popular instruments can help you invest in dematerialised gold. Let's look at each of them in detail:
Do you want to invest in gold ETFs? You can invest in any golf ETF scheme of your choice with the Fi money app.
The taxes paid on selling and purchasing commodities like gold and silver in physical form decreases their return on investment. You can invest in virtual gold instruments to undo these shortcomings.
Users can find several investment options on the Fi app. Be it short-term or long-term — it's easy to invest with a simple swipe of your phone's screen. Fi also offers a Peer-to-Peer investment feature called Jump! Jump can help you earn up to 9% p.a on your investment. But if you want to save up for a short-term goal & earn interest on it, select our super-flexible Smart Deposit. If you're looking for higher/stable returns, opt for a Fixed Deposit.
Yes, when you buy gold, you pay taxes like GST on the gold value and the making charges. The same is the case for buying silver. When you redeem these investments, you pay STCG and LTCG taxes based on the time you have held them.
Yes, gold is taxed when sold in virtual or physical form. For instance, if you have held gold in coins and jewellery for less than 36 months, STCG tax will be applicable. Similarly, for physical units held for a longer period than 36 months, you will incur LTCG tax.
No commodity purchase is tax-free. On purchasing silver in physical form, you have to pay GST. Also, if you invest in a silver ETF, you will have to pay STCG or LTCG tax on redemption.
This depends on how long you've owned the jewellery. If you own it for less than a year, the gain is taxed at an ordinary income rate. If you own the jewellery for a year or more, the profits made are taxed at the capital gains rate. You don't owe any capital fain if you incur a loss at sale.
To calculate gain on sale of gold:
Yes, Silver has a 3% GST rate in India currently.