Skip to main content

Physical Gold Holding and Tax liability

Check the tax guidelines before you book profits on gold holdings

If you value gold as an investment avenue, this is a good time to sell part of your holdings and earn a profit. Demand for gold during the current marriage season saw its price peak to `20,800 for 10 grams on November 24. It has since been moving in the same range. Yet, depending on how long you have held the metal and in what form, there will be certain tax implications.

Like land and shares, gold is also considered an asset. Any profit on the sale will attract tax.

The rule for taxation differs for gold exchange-traded funds (ETFs), gold equity funds and physical gold.

Profits from physical gold, such as gold coins, bars or ready jewellery, if sold within three years, are considered short-term capital gains (STCG). They would be added to your total income for the year and you have to pay the tax according to the tax slab applicable.

Selling physical gold assets after three years is a better idea. The holding period of the investment is an important aspect that is looked at by the income tax department.

Long-term capital gains (LTCG) are applicable to gold investments sold after three years. You could use the indexation benefits of LTCG and pay only 20 per cent on the amount earned.

With gold prices rising, the demand for alternative investment opportunities in the metal, such as gold ETFs and gold equity funds, too, are rising. Year-on-year (Y-o-Y) returns from both, gold ETFs and physical gold, has been 13 per cent, on average.

Gold ETFs offered by funds like HDFC or Religare invest in physical gold bars. Investors buying ETFs hold the fund's units. The value of a single unit is equal to approximately one gram of gold.

Gold equity funds such as DSP Black Rock World Gold Fund and AIG World Gold Fund are schemes that typically invest in other international fund of funds, that buy the stocks of companies involved in gold mining.

Both ETFs and gold equity funds are treated as debt funds and taxed accordingly. Selling within a year would attract STCG. For sales after a year, an individual could have to pay the LTCG tax. Under this, you either pay 10 per cent tax without any indexation benefit or 20 per cent on the amount earned or avail indexation benefit.

All LTCG taxes attract an additional three per cent educational cess.

If the new Direct Taxes Code structure takes effect from April 1, 2012, in its present form, investors need to keep in mind the holding period of the investment. Investment assets that have been held on for a year from the end of the financial year during which the asset was purchased will be taxed according to the income tax slabs. But the amount of profit will be arrived at after indexation.

For instance, assume one has sold his gold assets for `2lakh. If after indexation of cost (1.2 lakh), his profit is `80,000, he would add this amount to his other income and pay taxes depending on the tax slab he falls under.

Besides the tax angle, investors are advised to take a cautious approach to selling their gold. Despite the run-up in gold prices, one cannot rule out a further hike. It might be best, for investors, to sell just a part of their gold allocation.

Popular posts from this blog

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

Mutual Fund Review: HDFC Index Sensex Plus

  In terms of size, HDFC Index Sensex Plus may be one of the smallest offerings from the HDFC stable. But that has not dampened its show, which has beaten the Sensex by a mile in overall returns   HDFC Index Sensex Plus is a passively managed diversified equity scheme with Sensex as its benchmark index. The fund also invests a small proportion of its equity portfolio in non-Sensex scrips. The scheme cannot boast of an impressive size and is one of the smallest in the HDFC basket with assets under management (AUM) of less than 60 crore. PERFORMANCE: Being passively managed and portfolio aligned to that of the benchmark, the performance of the index fund is expected to follow that of the benchmark and in this respect, it has not disappointed investors. Since its launch in July 2002, the fund has outperformed Sensex in overall returns by good margins.    While every 1,000 invested in HDFC Index Sensex Plus in July 2002 is worth 6,130 now, a similar amount invested in Sensex then wo...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now