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Buying gold on special festivals like Dhanteras and Diwali is considered auspicious. This is why gold sales are breaking records these days. But if you're buying gold not just for wearing but for investment purposes, it's crucial to have accurate knowledge of its tax rules.

While traditional gold jewelry remains the most common method, people are increasingly turning to smarter options like Gold ETFs and Sovereign Gold Bonds (SGBs). These not only eliminate the hassle of storage and purity, but also offer tax advantages.

How is gold jewelry taxed?
When you buy jewelry or gold bars, you face making charges, GST, and capital gains tax upon sale. If you hold them for more than 24 months, you'll be taxed at 12.5% ​​without indexation (as per the rules after July 23, 2024). However, if you sell them within less than 24 months, they'll be taxed according to your income tax slab. Keep in mind, physical gold offers no tax exemption, and storing it is also a hassle.

Gold ETFs: Flexibility and Tax Benefits
Gold ETFs, also known as exchange-traded funds, are mutual funds that track gold prices. They can be bought and sold through the stock market, making them easy to sell and free of lock-in. If you sell ETF units purchased before April 1, 2025, within 12 months, you will be taxed according to your income tax slab. Units held beyond 12 months now attract a 12.5% ​​tax rate (without indexation).

SGBs: Best for the Long Term
SGBs, also known as Sovereign Gold Bonds, are issued by the Government of India. They have a tenure of 8 years and earn 2.5% interest annually, which is credited to your bank account. When it comes to taxes, these are the most beneficial. If you cash out your SGB upon maturity after 8 years, there's no tax on it. This means the entire profit is tax-free.

However, if you sell it earlier, you'll pay a 12.5% ​​tax if you hold it for more than 12 months. If you sell it after less than 12 months, you'll be taxed at the slab rate. However, the 2.5% annual interest earned is added to your income and is taxable. SGB is ideal for those with a long-term vision and a tax-saving approach.

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