Over the last 12 months, the gold price in India has increased by over 76 per cent. Despite the increase, India’s love for gold shows no indication of slowing down.
Unlike a few years ago, when gold was held in physical forms such as jewellery, coins and bars, investors/purchasers are now moving to modern ways of investing/holding gold such as Sovereign Gold Bonds (SGBs), Exchange-Traded Funds (ETFs), and gold mutual funds.
Capital asset
Investment in gold is considered as a capital asset. With the price of gold hitting the roof, people may be looking at selling the gold. The profits on the sale of gold, in any form, are taxable in India. The taxation of gold varies depending on the form in which it is held and period for which it is held.
• Physical Gold (Jewellery, Coins, Bars):
If sold within 24 months, these will be treated as short-term capital gains (STCG) and will be taxed at the slab rate. If these are held for more than 24 months it would be treated as Long-Term Capital Gains (LTCG) and would be taxed at 12.5% without indexation benefit.
• Sovereign Gold Bonds (SGBs):
Income from SGBs are in two forms
o Interest income: SGBs earn interest at a nominal rate of 2.5%. This interest is taxable at normal slab rate.
o Capital gains on sale/transfer: If SGBs are held till maturity (8 years), then the same will be exempt from tax. In other cases, it would be akin to the sale of an unlisted mutual fund and treated as LTCG if held for more than 24 months and taxed @ 12.5% and STCG otherwise and taxed at slab rates.
• Gold ETFs and Mutual Funds:
Similar to physical gold, if sold within 24 months, these will be treated as STCG and would get taxed at the slab rate. If these are held for more than 24 months it would be treated as LTCG and would be taxed T 12.5% without indexation benefit.
In addition, GST at 3 per cent is applicable on investment in gold except purchase of SGBs & ETFs.
Possible changes in budget 2026
• In order to determine the taxability of profit of gold, different holding periods apply to different forms of gold. Lower holding period is required for digital form of gold to qualify as long term capital asset as compared to physical form. It will be good to bring all forms at par.
• With the soaring gold price, the industry would like a reduction in the GST rate on gold. This will help boost sales.
• Currently import duty on gold is 6 per cent. There is a lot of push from the industry to reduce the duty. This will help the industry and also curb smuggling.
• Keeping in mind that yellow metal is a scarce resource, the Government should incentivise digital form of gold products like gold ETFs and sovereign gold bonds (SGBs).
The author is Partner, Sudit K. Parekh & Co. LLP
Published on January 18, 2026
