How to make gold investments tax efficient after Budget 2024 changed capital gain rules: New STCG, LTCG rates on gold, gold MF, gold ETF, SGB The recent changes in capital gains tax rules introduced in Budget 2024 have significant implications for those who invest in gold. We delve into the new short-term and long-term capital gains tax rules and their impact on various gold investment avenues, including physical gold, gold bonds, gold mutual funds and gold ETFs
From purchasing physical gold on auspicious occasions to buying gold bonds or mutual funds, investing in gold is quite popular in Indian households. The recent Budget 2024 has introduced significant changes to the capital gains tax rules, impacting how gold investments are taxed. Whether you are a seasoned investor or just starting your gold journey, understanding these changes is crucial to making informed financial decisions. ET Wealth Online explains new capital gains rules on your gold investments — physical gold, gold mutual fund, gold ETF and Sovereign Gold Bond (SGB).#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
Physical gold capital gains: STCG and LTCG rule changes
Short-term capital gains or STCG on physical gold after Budget 2024
Budget 2024 introduced only two holding periods — 12 and 24 months — to qualify for short-term or long-term capital assets. All asset classes, other than listed securities, will be classified as short-term if held for less than 24 months (two years).For physical gold, the holding period for short-term capital gains (STCG) has been reduced from three years to two years after Budget 2024. The new rule came into effect on July 23, 2024.
Long-term capital gains or LTCG on physical gold after Budget 2024
Old rule: Gains from physical gold sold after being held for three years were used to attract a long-term capital gains (LTCG) tax of 20% along with an indexation benefit.New rule: Budget 2024 has reduced LTCG from 20% to 12.5% on gold. So if you sell your gold after holding it for two years, a 12.5% LTCG tax will be payable on the gains. However, Budget 2024 removed indexation on gold investments. So you will no longer get indexation benefits that were earlier applicable on LTCG.
Gold mutual fund: Capital gains tax rule change after Budget 2024
Short-term capital gains or STCG on gold mutual funds after Budget 2024
Old rule: If the units of gold mutual funds were sold within three years of purchase, the gains were added to the taxable income and taxed at the applicable income tax slab rates.New rule: While the holding period for short-term capital gain will come down in the new rule, the tax rate won’t change. For units of gold mutual funds purchased between April 1, 2023, and March 31, 2025, the gains will be added to the taxable income and taxed at the applicable income tax slab rates, irrespective of the holding period.
The reduced holding period will take effect from April 1, 2025. If the units are purchased after March 31, 2025, and sold within two years, the gains will be added to the taxable income and taxed at the applicable income tax slab rates. So if the holding period is two years to three years, the gains will be considered long-term gain according to the new rule, and hence taxed accordingly at special rates.
Long-term capital gains or LTCG on gold mutual funds after Budget 2024
Old rule: Gold mutual fund units bought before March 31, 2023, and sold after three years, would attract LTCG at 20% along with indexation benefit.If the gold mutual fund units were purchased after April 1, 2023, the gains were added to the taxable income of the investor and taxed at the applicable income tax slab rates.
New rule: There is no special tax rate for investment in gold mutual funds in the intervening period. For units purchased between April 1, 2023, and March 31, 2025, the gains would be added to the taxable income of the investor and taxed at the applicable income tax slab rates (irrespective of the holding period). If investors buy units of the gold mutual fund after March 31, 2025, and sell after two years, a 12.5% tax on the gains will be payable without the indexation benefit.
Gold ETF capital gains: STCG and LTCG new rules after Budget 2024
Budget 2024 has clarified how capital gains tax will be applicable on gold ETFs. For gold ETFs, the LTCG period would be 12 months, which would be taxed at 12.5% without indexation, while the STCG would be taxed at the applicable slab rate. However, you need to be mindful about the date from when this rule is going to apply.Short-term capital gains or STCG on gold ETF after Budget 2024
Old rule: The holding period for short-term capital gains on gold ETF was set at three years before Budget 2024. So if the units of gold ETFs were sold within three years, the gains were added to the taxable income of the investor and taxed at the applicable income tax slab rates.New rule: Budget 2024 announced that if the units were purchased between April 1, 2023, and March 31, 2025, the gains would be added to the taxable income and taxed at the applicable income tax slab rates (irrespective of the holding period).
The tax rate won’t change but the holding period will come down if you invest from the next financial year. If you buy units of gold ETFs after March 31, 2025, and sell before 12 months, the gains will be added to the taxable income and taxed at the applicable income tax slab rates.
Long-term capital gains or LTCG on gold ETF after Budget 2024
Old rule: For gold ETF units purchased before March 31, 2023, and sold after three years, a 20% tax on gains was applicable, along with indexation benefits. If the units were purchased after April 1, 2023, the gains were added to the taxable income and taxed at the applicable income tax slab rates.New rule: If you buy gold ETFs between April 1, 2023 and March 31, 2025, the gain will be added to the taxable income and taxed at the applicable slab rates (irrespective of the holding period). Do remember that when you buy gold ETFs after March 31, 2025, and sell after 12 months, a 12.5% tax will be payable on the gains without the indexation benefits.
So the holding period for gold ETF has been reduced from 36 months to 12 months to qualify as long-term capital gains.
Sovereign gold bond or SGB: LTCG, STCG tax rule
There is no STCG or LTCG when you sell sovereign gold bonds (SGBs) to the Reserve Bank of India (RBI) at maturity. There is no change in this rule after Budget 2024.If the bonds were sold within three years, the gains were added to the taxable income and taxed at the applicable income tax slab rates. This rule will apply on SGB sold before July 23, 2024. Earlier, the short-term holding period of SGB was three years. If held for 3 years or more, the gains are taxed at 20% with indexation benefit.
However, Budget 2024 has reduced the holding period from 36 months to 12 months to qualify it as a short-term asset. If the holding period is more than 12 months, then the sovereign gold bonds would be considered as long-term assets. As the gain qualifies to be a long-term capital gain, the tax rate will be 12.5% (if it is sold on or after July 23, 2024).
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This story originally appeared on: India Times - Author:Faqs of Insurances
