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In India, gold and silver are not only considered jewelry but also a reliable investment option. However, while paying attention to prices is important when investing in them, understanding the tax rules is equally crucial. According to tax experts, the tax on gold and silver primarily depends on two factors: the type of investment and the holding period. If the investment is not redeemed at the right time, investors may have to pay thousands of rupees in additional taxes.

Buying jewelry is expensive.
According to Chartered Accountant Hitesh Jain, a 3% GST is levied on the purchase of physical gold, silver, or digital gold. If jewelry is purchased, an additional 5% GST is also levied on the making charges. However, this GST cannot be adjusted against the capital gains tax later. Capital gains tax is applicable when the investor sells the gold or silver. If you have held the gold or silver for more than 24 months, it will be considered a long-term capital gain and will be taxed at 12.5%. Selling it within 24 months will be considered a short-term capital gain, and the tax will be levied according to your income tax slab.

These are the rules for Gold Bonds
The rules for Sovereign Gold Bonds (SGBs) are slightly different for investors. The 2.5% annual interest earned on them is fully taxable. However, if the investor redeems the bond at the 8-year maturity, the capital gain is completely tax-free. If it is sold within 12 months, the tax is levied according to the tax slab, while selling it after 12 months attracts a 12.5% ​​LTCG tax.

The holding period also plays a crucial role in Gold and Silver ETFs and mutual funds. STCG applies for holding periods up to 12 months, and LTCG applies for holding periods longer than 12 months. Tax experts warn that if an investor makes a profit of ₹2 lakh and sells the investment just one day before the stipulated period, they may have to pay approximately ₹36,400 more in taxes.

These are the rules for saving on taxes:
The good news is that there are also options to save on taxes. If selling gold or silver results in a long-term capital gain, that amount can be invested in a residential property to claim tax exemption under Section 54F of the Income Tax Act. Overall, experts believe that a thorough understanding of tax rules and proper timing are crucial before investing in gold and silver, to ensure that profits are maximized and the tax burden is minimized.

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