How is gold taxed in India? Gold is taxed under the capital gains framework when you sell it. Physical gold, jewellery, and digital gold held for more than 24 months attract long-term capital gains (LTCG) tax at 12.5% with no indexation benefit. If sold within 24 months, the gains are added to your total income and taxed at your slab rate. Gold ETFs (listed) qualify for LTCG after just 12 months. Sovereign Gold Bond redemption by the original subscriber at maturity remains exempt, but all other SGB exits are now taxable from FY 2026-27.
Gold is the most widely held investment in Indian households, yet it is also one of the most misunderstood when it comes to taxation. Whether you sold your mother's old bangles, redeemed a Sovereign Gold Bond, or exited a gold ETF, the capital gains treatment varies by the form of gold, the holding period, and the date of acquisition. With Finance Act 2024 removing the indexation benefit for gold and Budget 2026 tightening the SGB exemption, the rules have changed materially in the last two assessment years. This guide covers every form of gold, the applicable rates for AY 2026-27, worked examples, and the exemptions that can legitimately reduce your tax outgo.
Tax on Sale of Physical Gold and Jewellery
Physical gold includes gold bars, coins, biscuits, bullion, and all forms of gold, silver, and platinum jewellery and ornaments. For income tax purposes, all of these are treated as "capital assets" under Section 2(14) of the Income Tax Act, and any profit on sale is taxable as capital gains.
Holding Period
For transfers on or after 23 July 2024, physical gold and jewellery are long-term capital assets if held for more than 24 months (it was 36 months earlier). Held for 24 months or less, the gain is short-term.
Tax Rates
Long-term capital gains (LTCG): Flat 12.5% under Section 112. No indexation benefit is available. The indexation option (choose between 12.5% without indexation or 20% with indexation) applies only to land and building, not to gold or jewellery. This is a common point of confusion. Finance Act 2024, effective for transfers on or after 23 July 2024, removed the indexation benefit for all asset classes except land and building.
Short-term capital gains (STCG): Added to your total income and taxed at your applicable slab rate. No special concessional rate applies.
Cost of Acquisition
Your cost of acquisition for gold jewellery is not just the gold value. It includes:
- Purchase price of gold (weight x rate per gram)
- Making charges paid to the jeweller
- GST paid on the purchase (3% on the full invoice value of ready-made jewellery, including making charges)
All of these together form your cost of acquisition. Keep the purchase invoice from the jeweller, as it is the primary proof of cost.
No TDS on Physical Gold Sale
There is no TDS deducted when you sell physical gold or jewellery to a jeweller. Section 194S (1% TDS on virtual digital assets) applies only to cryptocurrency and other VDAs, not to physical gold. No TDS does not mean no tax: you must still work out and report the gain in your return, and keep the sale bill as proof, even if the sale does not show up in your Annual Information Statement (AIS).
Worked Example
You purchased a gold necklace in March 2022 for Rs 3,50,000 (total invoice: gold value, making charges and 3% GST). You sell it in August 2025 for Rs 5,20,000.
- Holding period: March 2022 to August 2025 = more than 24 months, so LTCG
- Cost of acquisition: Rs 3,50,000 (the full invoice amount including GST and making charges)
- LTCG = Rs 5,20,000 minus Rs 3,50,000 = Rs 1,70,000
- Tax = 12.5% x Rs 1,70,000 = Rs 21,250 (plus applicable surcharge and cess)
Tax on Sale of Gold ETFs (Listed)
Gold ETFs are units listed on a recognised stock exchange (NSE/BSE) and are classified as listed securities. This gives them a significant tax advantage over physical gold.
Holding Period for LTCG
Gold ETFs are listed units. For transfers on or after 1 April 2025, they are no longer "specified mutual funds" under Section 50AA (that definition now covers only funds with more than 65% in debt and money market instruments). So:
- Held more than 12 months: long-term
- Held 12 months or less: short-term
Gold ETF units bought between 1 April 2023 and 31 March 2025 and sold before 1 April 2025 were taxed as short-term under Section 50AA regardless of holding period.
Tax Rates
LTCG: Flat 12.5% under Section 112, no indexation.
STCG: Added to total income, taxed at slab rates.
Gold ETFs are more tax-efficient than physical gold because of the shorter 12-month LTCG threshold (for transfers from 1 April 2025). If you hold a gold ETF for just over a year, your gains qualify as long-term and are taxed at 12.5% instead of slab rates which could be as high as 30%.
Tax on Gold Mutual Funds (Fund of Funds, Unlisted)
Gold mutual funds (like SBI Gold Fund, HDFC Gold Fund, Nippon India Gold Savings Fund) are fund-of-funds that invest in gold ETFs. These are unlisted units, so they get a different treatment from listed gold ETFs.
Holding Period and Tax Rates
- Held more than 24 months: LTCG at 12.5% under Section 112, no indexation
- Held 24 months or less: STCG at slab rates
Unlike listed gold ETFs which get the 12-month benefit, gold mutual funds retain the 24-month threshold because their units are unlisted. This is an important distinction when choosing between a gold ETF and a gold mutual fund for tax planning.
Tax on Sovereign Gold Bonds (SGBs): Budget 2026 Changes
This is the section with the most significant recent changes. The Finance Act 2026 amended section 70(1)(x) of the Income-tax Act 2025, and the new rules apply from tax year 2026-27 (1 April 2026) onward.
Before Budget 2026 (Up to FY 2025-26)
Under the earlier rules, capital gains on SGB redemption were fully exempt regardless of whether the holder was the original subscriber or a secondary market buyer. Premature redemption after the 5-year lock-in was also exempt. Only the 2.5% annual interest was taxable at slab rates.
From FY 2026-27 (Budget 2026 Changes)
The exemption has been narrowed significantly:
- Capital gains exemption applies only to the original subscriber who purchased during the primary RBI issue and holds the bond until maturity (8 years)
- Premature redemption (even after the 5-year lock-in window): Not exempt. LTCG taxed at 12.5%
- Secondary market purchases (bought on NSE/BSE from another holder): Not exempt. LTCG taxed at 12.5%, even if held to maturity
- Interest: 2.5% per annum, taxable at slab rates (unchanged)
For a deeper analysis of SGB-specific rules, see our dedicated Sovereign Gold Bond taxation guide.
SGB Tax Treatment Comparison
| Situation | Up to FY 2025-26 | From tax year 2026-27 |
|---|---|---|
| Original subscriber, held to maturity | Exempt | Exempt |
| Original subscriber, premature redemption with RBI | Exempt | Taxable as capital gains |
| Bought on stock exchange, held to maturity | Exempt | Taxable as capital gains |
| Sold on stock exchange before maturity | Taxable (LTCG 12.5% after 12 months) | Taxable (LTCG 12.5% after 12 months) |
| 2.5% annual interest | Taxable at slab rate | Taxable at slab rate |
Tax on Digital Gold
Digital gold purchased through apps like PhonePe, Google Pay, Paytm, or platforms like Augmont and SafeGold is treated as physical gold for income tax purposes. The tax rules are identical:
- Holding period: More than 24 months for LTCG
- LTCG rate: 12.5%, no indexation
- STCG rate: Slab rates
The digital gold platform may issue a sale statement showing purchase price, sale price, and the quantity in grams. Keep this as your cost documentation. Digital gold is not the same as a gold ETF. It represents actual gold stored in a vault on your behalf, not a listed security.
Tax on Inherited or Gifted Gold
Gold jewellery is commonly passed down through families. The tax rules for inherited and gifted gold differ from a straightforward purchase.
Inherited Gold
When you inherit gold jewellery through a will or by succession:
- Cost of acquisition: The cost at which the previous owner (the deceased or the original purchaser in the chain) acquired the gold. It is not the market value on the date of inheritance.
- Holding period: Includes the previous owner's holding period. If your grandmother bought the gold in 1985 and you inherited it in 2020, the holding period starts from 1985.
- Since inherited gold has typically been held for decades, it almost always qualifies as a long-term capital asset.
Gifted Gold from a Relative
Under Section 56(2)(x), gold received as a gift from a relative (as defined in the Income Tax Act: spouse, siblings, parents, children, grandparents, grandchildren, and certain in-laws) is fully exempt from gift tax, regardless of value.
When you sell this gifted gold:
- Cost of acquisition: The donor's original purchase cost
- Holding period: Includes the donor's holding period
Gifted Gold from a Non-Relative
If gold jewellery is received from a non-relative and the aggregate fair market value of such gifts in the year exceeds Rs 50,000, the entire fair market value (not just the excess over Rs 50,000) is taxable as income from other sources in the year of receipt.
When you eventually sell this gold:
- Cost of acquisition: The fair market value that was taxed in your hands under Section 56(2)(x) (Section 49(4)), not the donor's cost
- Holding period: Includes the donor's holding period
Worked Example: Inherited Jewellery
Your mother purchased gold jewellery in 2005 for Rs 80,000. You inherited it in 2020. You sell it in September 2025 for Rs 4,50,000.
- Cost of acquisition: Rs 80,000 (your mother's purchase cost, not the 2020 market value)
- Holding period: From 2005, clearly long-term
- LTCG = Rs 4,50,000 minus Rs 80,000 = Rs 3,70,000
- Tax = 12.5% x Rs 3,70,000 = Rs 46,250 (plus surcharge and cess)
Note: There is no indexation benefit available. The old rule of 20% with indexation for gold was replaced by the flat 12.5% rate for transfers on or after 23 July 2024.
CBDT Safe Harbor Limits for Gold Holdings
During income tax search or survey operations, tax authorities may seize undisclosed assets. However, CBDT Instruction No. 1916 dated 11 May 1994 provides safe harbor limits for gold jewellery that will not be seized, even if the holder cannot produce purchase receipts or explain the source from income records:
| Family member | Jewellery not seized |
|---|---|
| Married woman | 500 grams |
| Unmarried woman | 250 grams |
| Male member | 100 grams |
Important Clarifications
These safe harbor limits are not legal holding limits. There is no law that restricts how much gold an Indian citizen can hold. You can legally hold any quantity of gold as long as you can explain the source: purchase invoices, inheritance records, wedding gift documentation, agricultural income used for purchase, etc.
Gold coins and bars do not get this safe harbor protection. Only gold jewellery and ornaments are covered. Coins and bars found during a search may be seized if the holder cannot explain the source with documentary evidence.
GST on Gold Purchase: Impact on Cost of Acquisition
While GST is not an income tax, it directly affects your capital gains computation because the GST paid at purchase forms part of your cost of acquisition. Ready-made jewellery attracts 3% GST on the full value, including making charges (5% applies only to separately billed job work on the customer's own gold).
Total cost of acquisition = (Gold value + Making charges) + 3% GST on that total
For detailed GST rules on gold, see our dedicated guide.
Example: You buy a gold chain weighing 20 grams at Rs 6,000 per gram.
- Gold value: 20 x Rs 6,000 = Rs 1,20,000
- Making charges (say 10%): Rs 12,000
- GST: 3% x Rs 1,32,000 = Rs 3,960
- Total cost of acquisition: Rs 1,35,960
When you sell this gold, Rs 1,35,960 is your cost of acquisition for capital gains computation, not just the gold value of Rs 1,20,000.
Capital Gains Exemption on Gold Sale (Section 54F)
Many gold sellers do not know that they can claim a powerful Section 54F exemption when they sell gold and invest the proceeds in a residential house.
How Section 54F Works for Gold
Section 54F provides exemption from LTCG on the sale of any capital asset other than a residential house, provided you invest the net sale consideration (the entire sale price, not just the gains) in a new residential house.
Conditions
- The asset sold must be a long-term capital asset (gold held for more than 24 months qualifies)
- You must not own more than one residential house on the date of transfer (excluding the new house you plan to buy)
- Purchase the new house within 1 year before or 2 years after the date of sale, or construct within 3 years
- If you invest the full net sale consideration, the entire LTCG is exempt. If you invest a partial amount, proportionate exemption applies
- Maximum exemption is capped at Rs 10 crore
Worked Example
You sell ancestral gold jewellery for Rs 25 lakh. Your cost of acquisition (original owner's cost) is Rs 3 lakh. LTCG = Rs 22 lakh. You buy a flat for Rs 25 lakh within 2 years.
Since you invested the entire net sale consideration (Rs 25 lakh) in a residential house and you do not own more than one house, the full Rs 22 lakh LTCG is exempt under Section 54F. No capital gains tax is payable.
If you invest only Rs 15 lakh in the house, the exempt portion = Rs 22 lakh x (Rs 15 lakh / Rs 25 lakh) = Rs 13.2 lakh. The remaining Rs 8.8 lakh is taxable at 12.5%.
Reporting Gold Sale in Your ITR
Gold sale must be reported in Schedule CG (Capital Gains) of your income tax return. You need to file ITR 2 or ITR 3 to report capital gains. ITR 1 (Sahaj) does not have Schedule CG.
Where in Schedule CG
Report the gold sale under "Other assets" (not under land/building and not under listed shares). The fields typically required are:
- Date of sale and date of purchase (or date of inheritance/gift)
- Sale consideration (the amount received)
- Cost of acquisition (purchase price including making charges and GST)
- Any transfer expenses (brokerage, if applicable)
- Capital gains = Sale consideration minus cost of acquisition minus transfer expenses
- Whether long-term or short-term
Documentation to Maintain
- Purchased jewellery: Jeweller's invoice showing weight, purity (karat), making charges, GST
- Inherited gold: Will, succession certificate, death certificate of the previous owner, any available purchase records or valuation report from the time of original purchase
- Gifted gold: Gift deed (if any), evidence of relationship (for relative exemption)
- Gold ETF/Mutual Fund: Demat statement, redemption statement from AMC
- SGB: RBI allotment letter or demat statement, redemption advice
Common Mistakes in Gold Taxation
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Using market value as cost for inherited gold. The correct cost is the previous owner's purchase price, not the market value on the date of inheritance. This is the single most common error.
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Forgetting to include making charges in cost of acquisition. Making charges and the GST paid are part of the cost. Excluding them inflates your capital gains and your tax.
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Assuming "personal jewellery" is tax-free. There is no exemption for personal-use jewellery. Capital gains tax applies on the sale of all gold and jewellery, whether personal or investment.
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Not reporting gold sale because no TDS was deducted. There is no TDS on physical gold sales, but the gain is still taxable and must be reported in Schedule CG. Not reporting it is under-reporting of income, which can attract tax, interest and penalty if picked up later.
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Claiming indexation benefit on gold sold after July 2024. Indexation is available only for land and building (for individuals and HUFs with pre-23 July 2024 purchases). Gold, jewellery, ETFs, and all other assets get only the flat 12.5% rate without indexation.
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Treating gold exchange as non-taxable. When you exchange old gold for new jewellery at a jeweller, the exchange is a deemed sale of old gold at the value credited. Capital gains apply on this deemed sale.
Frequently Asked Questions
How long must I hold physical gold for long-term capital gains?
Physical gold, jewellery, coins and digital gold become long-term capital assets when held for more than 24 months. For sales on or after 23 July 2024, LTCG is taxed at a flat 12.5% plus surcharge and cess, without indexation. Gains on gold held for 24 months or less are short-term and added to your income at slab rates.
What is the cost of inherited gold jewellery when I sell it?
The cost is what the previous owner paid for it, not its market value when you inherited it, and the previous owner's holding period is added to yours. If that cost cannot be proved for gold bought before 1 April 2001, you can take the fair market value as on 1 April 2001, backed by a registered valuer's report.
Is exchanging old gold for new jewellery taxable?
Yes. Exchanging old jewellery at a jeweller is treated as a sale of the old gold at the value credited to you, so capital gains arise on the difference between that value and your original cost. If the old gold was held for more than 24 months, the gain is taxed at 12.5% as LTCG, and Section 54F relief is not available unless you invest in a house.
How much gold jewellery can I keep at home without it being seized?
Under CBDT Instruction 1916 of 1994, during a search officers are not to seize gold jewellery up to 500 grams per married woman, 250 grams per unmarried woman and 100 grams per male member of the family, even without receipts. This is not a legal limit on holding gold. Larger holdings are fine if you can explain the source, such as invoices or inheritance records.
Can I avoid tax on gold sale by buying a house?
Yes, through Section 54F. If you sell long-term gold and invest the entire net sale proceeds in one residential house in India, bought within one year before or two years after the sale, or constructed within three years, the whole LTCG is exempt. You must not own more than one house other than the new one on the sale date, and the exemption is capped at Rs 10 crore.
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