The government has revised the capital gains taxation rules for all kinds of assets, including gold, mutual funds, stock, and real estate.
Reetu | Oct 30, 2024 |
New Taxation Rule for Gold: Govt changed Capital Gain Tax Rule on Gold; Know about New Rule
The government has revised the capital gains taxation rules for all kinds of assets, including gold, mutual funds, stock, and real estate. The new rules take effect on July 23, 2024, i.e., the current financial year.
If you plan to buy or sell gold this Diwali, you should be aware of the new income tax laws for capital gains on gold. Here’s an overview of the taxes you’ll pay while purchasing gold in various forms this Diwali.
Necklaces, earrings, rings, and other types of gold jewellery are available for purchase. When you buy gold jewellery, you must pay 3% Goods and Services Tax (GST). GST is charged on gold jewellery prices plus making expenses. Gold jewellery purchases are not subject to income tax.
If you trade your old gold jewellery for a new one, this is considered selling old gold. The capital gains tax rules will apply to the selling of old gold jewellery.
According to the new income tax rule, if the old gold jewellery is sold after two years, the capital gains will be long-term capital gains (LTCG). The LTCG tax rate of 12.5% will apply. However, there will be no indexation benefits.
If the old gold jewellery is sold prior to two years from the date of purchase, the gains are deemed short-term capital gains (STCG). STCG will be taxed at the income tax slabs that apply to your income.
The income tax laws for buying and selling digital gold are similar to those for physical gold.
The new capital gains tax rules will apply to gold mutual funds and ETFs beginning April 1, 2025. Until March 31, 2025, previous capital gains tax rules will apply to the purchase and sale of gold mutual funds and ETFs.
This is because the government changed the definition of debt mutual funds. The revised definition will go into effect on April 1, 2025. Currently, a specified debt mutual fund is defined as one that invests no more than 35% of its entire proceeds in equity shares of domestic companies.
According to the amended definition, a mutual fund is classified as a debt mutual fund that invests more than 65% of its total revenues in debt and money market instruments, or as a fund-of-fund with a comparable debt investment mix.
In accordance with the old capital gains tax rules, capital gains from selling gold mutual funds and gold ETFs will be deemed STCG. The capital gains will be taxed at the income tax slabs that apply to your income.
Gold Mutual Fund
If sold before 24 months have passed since the investment date, the gains will be considered STCG. STCG will be taxed in accordance with the applicable income tax slabs.
If the gold mutual fund is sold after 24 months from the investment date, the gains will be classified as LTCG. The LTCG will be taxed at 12.5% without an indexation benefit.
Gold ETFs
Gains from listed gold ETFs will be considered STCG if sold before the end of the 12-month period. STCG will be taxed at the income tax rules that apply to your income.
If the listed gold ETF is sold after 12 months, all profits will be considered LTCG. LTCG will be taxed at 12.5% without an indexation benefit.
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