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Gold prices in India have skyrocketed to an all-time high, reaching ₹1,21,200 per 10 grams of 24-carat gold. Over the past year, gold rates have surged by more than 50%, while the 3-year CAGR (compound annual growth rate) has remained around 30%. With the ongoing festive season, demand for gold in the form of jewellery and investment continues to rise. But before you sell your gold holdings at record-high prices, it’s crucial to understand how much tax you’ll pay on your profits under the new gold investment tax rules that came into effect from July 23, 2024.

New Gold Investment Tax Rules (Effective July 23, 2024)

According to the Finance Act, 2024, a new tax regime applies to physical gold, Gold ETFs, gold mutual funds, and Sovereign Gold Bonds (SGBs).
Here’s what has changed:

• Long-term capital gains (LTCG) on gold are now taxed at a flat 12.5% rate.

• The indexation benefit — which previously allowed investors to adjust purchase costs for inflation — is no longer available.

• These new rules are applicable to all forms of gold investments, including physical gold, ETFs, mutual funds, and prematurely sold SGBs.

1. Tax on Buying and Selling Physical Gold

When you buy gold, you don’t pay income tax directly, but you must pay:

• 3% GST on the gold value, and

• 5% GST on making charges (for jewellery).

When you sell gold, you are liable to pay income tax on any profit made from the sale.

If held for up to 24 months:

• The profit is considered Short-Term Capital Gain (STCG).

• Tax is levied as per your income tax slab rate.

If held for more than 24 months:

• The profit is treated as Long-Term Capital Gain (LTCG).

• A flat 12.5% tax applies without indexation benefit.

This change means investors will now pay higher taxes on long-term gains compared to the earlier regime that allowed inflation adjustment.

2. Tax on Gold ETFs and Gold Mutual Funds

Gold ETFs and gold mutual funds allow investors to invest in gold without holding it physically.

If held for 12 months or less:

• Gains are treated as short-term and taxed as per individual income slab rates.

If held for more than 12 months:

• Gains are treated as long-term.

• A 12.5% LTCG tax applies, without indexation benefits.

Earlier, these instruments were taxed like debt mutual funds with indexation, making them more tax-efficient. The new rule has significantly reduced that advantage.

3. Tax on Sovereign Gold Bonds (SGBs)

Sovereign Gold Bonds (SGBs) are government-backed securities issued by the Reserve Bank of India (RBI), based on 999-purity gold. Each bond has a tenure of 8 years and pays 2.5% annual interest on the initial investment amount.

Tax treatment for SGBs:

• If held till maturity (8 years):

  • No capital gains tax is levied on the profit.

  • The interest earned (2.5% yearly) is, however, taxable as income.

• If sold before maturity (after 5 years or earlier):

  • The gains are taxed depending on the holding period.

  • If held for 12 months or less: Gains are short-term and taxed as per your income tax slab.

  • If held for more than 12 months: Gains are long-term, taxed at 12.5%, with no indexation benefit.

SGBs can also be traded on stock exchanges if held in demat form, giving investors an early exit option.

4. Why This Change Matters for Investors

Until mid-2024, gold investments enjoyed indexation benefits that helped reduce the tax burden on long-term gains by accounting for inflation.
However, the new 12.5% flat LTCG rule simplifies taxation but removes inflation protection — meaning you could now pay higher taxes on older gold investments that have appreciated significantly over time.

For example:
If you bought gold for ₹5 lakh in 2018 and sold it for ₹10 lakh in 2025, your profit is ₹5 lakh.

• Earlier: After indexation, your taxable gain could have been ₹3 lakh, taxed at 20% = ₹60,000.

• Now: Full ₹5 lakh is taxed at 12.5% = ₹62,500.
  The difference seems small but increases with larger investments.

5. Key Takeaways

• New 12.5% LTCG tax applies to all gold forms — jewellery, ETFs, mutual funds, and SGBs (if sold before maturity).

• No indexation benefit is available under the new regime.

• Short-term gains continue to be taxed as per individual slab rates.

• SGBs held till maturity remain fully tax-exempt on capital gains.

• Investors should plan their exits strategically — holding SGBs till maturity or diversifying across gold instruments can help minimize tax outgo.

Final Thoughts

With gold trading near record highs, it may seem tempting to sell and book profits. However, before doing so, investors should evaluate the tax implications under the new 2024 rules. For long-term investors, SGBs remain the most tax-efficient route, while those in higher tax brackets may prefer ETFs or mutual funds for liquidity despite the tax cost.

In short, gold continues to shine as a reliable investment, but smart tax planning is key to ensuring your profits stay glittering too.