Gold Tax in India

Gold holds a special place in Indian culture and economy, making it a significant asset for many. However, the taxation on gold in India can be quite complex. This article aims to provide a detailed overview of the various taxes associated with gold in India, including GST, customs duty, and income tax.

Tax on Gold in India

Gold in India is subject to multiple taxes, which can vary depending on the form of gold and the purpose of purchase. Here are the key taxes:

1. Goods and Services Tax (GST)

GST is a significant tax levied on gold in India. The GST rate on gold varies based on the type of gold product:

• Physical Gold: The GST rate on physical gold is 3%. This includes gold jewellery, coins, and bars.
• Gold Biscuits: GST on gold biscuits is also 3%.
• Making Charges: The GST on making charges for gold jewelry is 5%.

2. Customs Duty

• Customs duty is imposed on the import of gold into India. The customs duty on gold bars and findings is 10%, and the Agriculture Infrastructure and Development Cess (AIDC) adds another 5%, making the total customs duty 15%.

3. Income Tax

• Income tax on gold transactions can be applicable in certain situations. For instance, selling physical gold that has been held for more than 36 months attracts a long-term capital gains tax of 20% plus a 4% cess, totaling 20.8%. Short-term capital gains tax is based on the individual's income bracket.

4. Agriculture Infrastructure Development Cess (AIDC)

• Correct, the Agriculture Infrastructure Development Cess (AIDC) is levied by the Government of India (GOI) to fund the nation's development. AIDC on gold imports has recently increased to 5%, up from 2.5%. When combined with other taxes like import duty (10%) and GST (3%), the overall tax on gold amounts to approximately 18%.

5. Making Charges and Associated GST

• Making charges, though not classified as a tax, are applied when crafting gold into coins or jewellery and attract additional GST. This GST on gold expenses may not be explicitly delineated but is included in the making charges section of the final bill during a gold purchase.

GST on Making Charges:

• The GST rate on making charges is 5%.
• Assuming a minimum making charge of 8% on gold worth ₹1,15,000, the making charges would be ₹9,200.
• The 5% GST on these charges would be ₹460.

Total Cost Calculation:

• Gold Value: ₹1,15,000
• Making Charges (8%): ₹9,200
• GST on Making Charges (5%): ₹460
• Total Cost: ₹1,28,660

6. Tax Deducted at Source (TDS):

• 1% TDS on gold purchases exceeding ₹1 lakh, adjustable against the annual tax liability.

Gold Tax Rate and Paper Gold

• The tax rate on gold can vary depending on the form and purpose of the gold purchase. Additionally, paper gold, which includes gold bonds and gold ETFs, is subject to different tax regulations compared to physical gold.

Gold Capital of India

• India is often referred to as the "Gold Capital of the World" due to its high consumption and demand for gold. The country imported gold worth $45.54 billion in the financial year 2023-24, highlighting its significant role in the global gold market.

Excise Duty on Gold

• Excise duty on gold was subsumed under GST in 2017, and now GST is the primary tax levied on gold transactions.

Conclusion

• Understanding the various taxes on gold in India is crucial for both investors and consumers. By being aware of the GST, customs duty, and income tax implications, individuals can make informed decisions about their gold investments and purchases.

FAQs:

How much tax is in gold?

The tax on gold in India includes:

• Customs Duty: 6% (5% Basic Customs Duty + 1% Agriculture Infrastructure and Development Cess)
• GST: 3% on the value of gold
• TDS: 1% on gold purchases above INR 1 lakh

What is the GST rate on gold?

• The GST rate on gold in India is 3% on the value of gold, gold jewellery, gold coins, and bars. This includes both 1.5% Central GST (CGST) and 1.5% State GST (SGST).

How much GST is 10 grams of gold?

To calculate the GST on 10 grams of gold, you can use the following formula:

• GST Amount = (Gold Value × GST Rate) / 100
• GST Amount = (₹60,000 × 3%) / 100 = ₹1,800

Is gold purchased as an investment taxable?

• Yes, gold purchased as an investment is subject to capital gains tax when sold. The applicable tax rate depends on the holding period of the investment.

What is the tax rate on gold jewelry?

• Gold jewelry is taxed based on the holding period. Short-term capital gains are taxed as per the investor's income tax slab rate, while long-term capital gains are taxed at 20% with indexation benefits.

Does physical gold attract wealth tax?

• Yes, the tax on the sale of digital gold attracts 20.8%, similar to physical and paper gold. For Short-Term Capital Gains (STCG), the tax is based on your income slab.

How much gold is allowed as per income tax?

Here's a summary of the gold jewelry and ornaments seizure limits per person:

• Married Women: 500 grams
• Unmarried Women: 250 grams
• Men: 100 grams

How much physical gold can you own in India?

According to the recent CBDT circular:

• Married Women: 500 grams
• Unmarried Women: 250 grams
• Men: 100 grams
• General Limit for Men: 500 grams

Is physical gold tax-free?

• According to the Indian Income Tax Act, the tax on the sale of physical gold is 20% on long-term capital gains (LTCG), plus a 4% cess. This results in an overall taxable rate of 20.8%.

How to buy gold without tax?

Under Section 54F of the Indian Income Tax Act:

• Proceeds from the sale of gold investments are exempt from tax if used to purchase a house within one year before or two years after the sale.
• Additionally, if the proceeds are utilized for constructing a house within three years of the sale, they will also be tax-exempt.

What is the tax on 24-carat gold in India?

• The GST rate on 24-carat gold in India is 3% of its value. For gold jewelry, a 5% GST is applied to the making charges. This uniform tax rate under GST ensures transparency and consistency in gold pricing across the country.

Are gifts of gold taxable?

• Gifts of gold received from specified relatives are exempt from tax. However, gifts exceeding Rs. 50,000 from non-relatives are taxable as per the recipient's income tax slab rate.

How is digital gold taxed?

• Digital gold is taxed similarly to physical gold. Short-term and long-term capital gains tax rates apply based on the holding period.

Are there any tax benefits for Sovereign Gold Bonds?

• Yes, interest earned on Sovereign Gold Bonds is taxable, but the capital gains from redemption are exempt from tax. If sold in the secondary market, STCG and LTCG tax rates apply.

How can I avail of indexation benefits on gold investments?

• Indexation benefits can be availed on long-term capital gains from gold investments held for more than three years. This allows adjustment of the purchase price for inflation, reducing taxable gains.

Do I need to report gold investments in my income tax return?

• Yes, the sale of gold investments should be reported under the 'Capital Gains' section of the Income Tax Return. Interest income from Sovereign Gold Bonds should be reported under 'Income from Other Sources.'

Is wealth tax applicable to gold investments?

• No, the wealth tax has been abolished in India since FY 2015-16, so it does not apply to gold investments.

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