Planning To Sell Your Gold? Here’s How You Will Be Taxed

We as a country, are among the world’s biggest consumers of gold. We tend to purchase the yellow metal during occasions like weddings, birthdays, festivals, etc. In fact, as per data from the World Gold Council, India and China together account for over 50% of the global total.

While we invest so much in gold, we may also come across situations when we may want to sell our old gold jewellery in exchange for some funds which we may require for certain expenses.

While selling gold jewellery for cash may seem easy, you must be aware of the tax implications of selling gold. You will need to pay capital gains taxes when you sell your gold. Depending on how long you have held the gold for, you will be subject to short-term capital gains tax (STCG) or long-term capital gains tax (LTCG).

Let’s understand the taxation on selling physical gold in detail.

Short-Term Capital Gains Tax (STCG)

If you sell your physical gold within 3 years of purchase, you will be subject to short-term capital gains. This gain will be added to your taxable income and will be taxed as per your income tax slab. For example, if you fall under the 30% income tax slab, the gain from the sale of gold i.e., the selling price minus your purchase price, will be taxed at 30%.

Long-Term Capital Gains Tax (LTCG)

If you sell your physical gold after 3 years of purchase, you will be liable to pay long-term capital gains tax. The LTCG on gains from the sale of gold is 20.8% with an indexation benefit. Indexation is used to adjust the rate of purchase of gold after inflation.

The long-term capital gains can be waived off if the entire amount received from the sale of gold is used to invest in government tax-benefit bonds like REC bonds, National Highway Authority of India bonds, etc. Another way to save LTCG is by using the net proceeds from the sale of gold to purchase a house either within 1 year before selling the gold or within 2 years of selling, or by using the net proceeds from the sale of gold to build a house within 3 years of the sale.

GST On Exchange of Jewellery

While selling your physical gold in exchange for gold jewellery, you must be cautious as you can be deceived. You must note that the exchange of physical gold for jewellery does not attract any GST if you exchange your old gold for the same quantity of physical gold.

For example, if you go to a jeweller with 100 grams of your old gold jewellery and exchange it for 100 grams of new gold jewellery, you will not be liable to pay any GST on the gold. You will only have to pay for making charges and the applicable taxes on it.

Also Read: 6 Ways To Invest In Gold