Investing in gold, whether digitally or physically, is a common practice in India. Understanding the taxation policies associated with these investments is crucial for effective financial planning. In this blog, we’ll explore how taxation on digital and physical gold works in India.
If you’re still unsure about which form of gold investment suits you, check out our guide on Digital Gold vs Physical Gold, Which One is Better?
Taxation on Physical Gold
Goods and Services Tax (GST)
When purchasing physical gold, such as jewelry, coins, or bars, a GST of 3% is levied on the value of the gold plus any making charges. This tax is applied at the time of purchase and is non-recoverable.
Capital Gains Tax
- Short-Term Capital Gains (STCG): If physical gold is sold within 36 months of purchase, the gains are considered short-term and are taxed as per the individual’s applicable income tax slab rate.
- Long-Term Capital Gains (LTCG): For gold held beyond 36 months, the gains are classified as long-term and are taxed at 20% with indexation benefits.
Taxation on Digital Gold
Digital gold investments follow a similar taxation structure as physical gold. If you’re new to digital gold investments, here’s a guide on the Best Apps to Invest in Digital Gold to help.
Goods and Services Tax (GST)
A 3% GST is applied to the purchase of digital gold, mirroring the tax on physical gold transactions.
Capital Gains Tax
- Short-Term Capital Gains (STCG): Selling digital gold within 36 months subjects the gains to STCG tax, taxed at the investor’s income tax slab rate.
- Long-Term Capital Gains (LTCG): For holdings beyond 36 months, LTCG tax applies at a rate of 20% with indexation benefits, aligning with the taxation of physical gold.
Comparative Taxation Overview
To provide a clear comparison, here’s a table summarizing the taxation aspects of physical and digital gold investments:
| Aspect | Physical Gold | Digital Gold |
| GST on Purchase | 3% | 3% |
| STCG (≤ 36 months) | Taxed as per income tax slab rates | Taxed as per income tax slab rates |
| LTCG (> 36 months) | 20% with indexation benefits (Source: Economic Times) | 20% with indexation benefits (Source: Economic Times) |
For a complete breakdown of gold investment strategies, you may also refer to our detailed article on the Best Ways to Invest in Gold & Types of Gold Investments in India
Conclusion
Both digital and physical gold investments in India are subject to similar taxation policies, encompassing GST and capital gains tax. Staying informed about these tax implications and recent legislative changes is essential for effective financial planning and optimizing returns on gold investments.
