Gold Taxability and its Holding Limits

This document covers

1. Different types of Gold
2. Permissible Limits
3. Gold Baggage Limit in India – Customs Rules for International Travellers
4. Taxability of Gold
5. Income Tax on Gold
6. Tax Saving on Sale of Gold
7. Gold Monetisation Scheme (GMS), 2015

1. Different types of Gold Investments

Gold can be invested in multiple forms and below are the some of the forms.

1. 🪙 Physical Gold: These can be invested in the form of jewellery, coins, bars or gold savings scheme. Also 3% GST on value.
2. 📜 Sovereign Gold Bonds (SGB): These are issued by the Reserve Bank of India (RBI) and the features are as follows
   • Interest: 2.5% annual interest (paid semi-annually)
   • Tenure of SGB: 8 years
   • No storage risk
   • Backed by Government of India
   • Helps in appreciation of capital
   • No impact of GST
3. 📈 Gold Exchange Traded Funds (ETF):Gold ETF is a commodity based mutual fund that invests in assets like Gold and the features are as follows
   • Traded on stock exchanges like shares. It combines the flexibility of stock investment and simplicity of gold investments
   • Requires Demat account for investing
   • High Liquidity
   • No impact of GST
4. 💰 Gold Funds: Gold funds are type of mutual fund investments that invests in Gold or bullion. The features of Gold funds are as follows
   • No demat account required for investment
   • Perfect hedge against inflation and ideal when the stock market is falling
   • No impact of GST
5. 📊 Gold Derivatives: Gold derivatives are financial instruments whose prices are derived from physical gold. Gold Derivatives are of 2 types i.e., gold futures and gold options. No impact of GST on gold value. However GST is charged on brokerage and other fee
6. 📱 Digital Gold: Digital Gold was introduced in 2010 by NSE India to suit Indians who like to invest in gold in electronic form and can be converted into physical form when they need. The features of digital gold are as follows
   • Fractional investment (start from ₹1) can be done
   • Option to convert into physical gold
   • No storage or locker charges
   • Prices are updated in real time based on international gold rates.
   • 3% GST on value of gold
   Example

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   Recently, several platforms such as Jar, Gullak, PhonePe, Paytm, and Amazon introduced features enabling users to invest in digital gold.

7. 💹 Electronic Gold Receipts (EGR’s):

   Electronic Gold Receipt is a dematerialized (digital) asset that represents ownership of physical gold stored in secure vaults. The features of EGR are as follows

   
   
   • EGR's are regulated by SEBI and traded on NSE Segement
   • EGR's are backed by real gold and can be bought and sold on stock exchanges
   • No making charges or storage costs and flexible to convert to physical gold
   • The Market timings are Monday - Friday 9:00 am to 11:30pm / 11:55 pm (based on US daylight saving time period
   • EGR's offer 999 and 995 purities
   • EGRs were launched on NSE from 4 May 2026
   NOTE

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   The brokers like grow, Zerodha, etc are still enabling EGR segment for the people to start trading EGR

2. Permissible limits for holding gold jewellery or ornaments

1. Acquired thru proper source of investment or will or inheritance:CBDT has clarified that there is no limit on holding of gold jewellery or ornaments if acquired from explained sources of income or through will or inheritance or gift. However, the income of the assessee should be inline with the gold held. Below is the documentation required
   • If purchased: Proper invoice for purchase of gold and the source of income for purchase of that gold should be explained
   • If acquired under inheritance or will: Will copy or Gift copy or other documents should be produced.
2. At the time of Search: Gold within the following limit will not be seized even at the time of search at the taxpayer premises. No proof is required for possession and investment for the following limit of gold.
   • Married Female – 500 Gms (1/2 Kg)
   • Unmarried Female -250 Gms (1/4 Kg)
   • Male member – 100 Gms

3. Gold Baggage Limit in India – Customs Rules for International Travellers

Gold is an important part of Indian culture, and many travellers carry gold jewellery or ornaments while returning to India. However, there are specific customs rules that define how much gold passengers can bring without paying duty or facing penalties. Knowing these limits in advance helps travellers avoid delays, additional taxes, or confiscation of gold at airports. Understanding the baggage allowance ensures a smooth and hassle-free entry into India.

1. Used Personal Jewellery: Used personal jewellery worn or carried by a passenger for genuine personal use during international travel is generally allowed into India under the duty-free baggage allowance. The passenger is not required to pay any customs duty
2. Duty-Free Gold Jewellery Limit for NRIs: A resident or tourists of Indian origin who have stayed abroad continuously for more than one year are allowed to bring gold jewellery into India without paying customs duty within prescribed limits.
   
   
   1. Female Passengers - 40 grams duty free
   2. Other than female passengers - 20 grams duty free

4. Taxability of Gold and its various forms

Gold and its various forms are deemed to be a capital asset and the sale of these would attract capital gains tax.

1. 🪙 Physical Gold/Gold ETF/Gold Mutual Fund/Digital Gold/EGR: Income arising from sales of these assets is taxable as capital gains.

   Type of Gain	w.e.f 23rd July 2024	Upto 22nd July 2024
   Long Term capital gain	Held for 2 years or more	Held for 3 years or more
   Long term capital Gain tax rate	Taxable @ 12.5%	Taxable @ 20%
   Indexation for long term	Not applicable	Applicable
   Short term capital gain	Taxable @ slab rate	Taxable @ slab rate

   
   
2. 📜 Sovereign Gold Bonds (SGB): Sovereign Gold Bonds consists of interest and the amount invested.

   Component	Income	Tax Treatment	Tax Rate
   Interest Income	Periodic interest earned on SGB	Taxable under "Income from Other Sources"	Slab rates
   Redemption at Maturity	Held till completion of 8 years (RBI redemption)	Fully exempt	No Tax
   Sale Before Maturity (Post 23 July 2024)	Sold after 2 years of holding	Long-Term Capital Gains	12.5% (No indexation benefit)
   Sale Before Maturity (Old Rule – till 22 July 2024)	Sold after 3 years	Long-Term Capital Gains	20% (with indexation benefit)

   
   

   Budget 2026 has amended the taxability of sovereign gold bonds, and it is applicable from 01st April 2026

   S.No	Conditions	Taxability
   1	If purchased at the time of issue (issued by RBI) and held till maturity	Exempt
   2	If purchased in secondary market and held till maturity	Taxable
   3	If purchased at the time of issue (issued by RBI or Secondary market) and not held till maturity	Taxable

   
   
3. 📈 Gold Derivatives:
   • Income on the sale of gold derivatives is considered as non-speculative business, and it is taxable @ slab rates.
   • The taxpayer can also claim the expenses as it is treated under the head business

5. Income Tax on Gold received under Gift or Inheritance or Will

The taxability of gold received under gift or inheritance or will is as follows.

1. Received from the relatives: If the gold is received under inheritance or will or gift from the relatives specified under income tax, the receiver is not liable to pay any income tax on the receipt. If the receiver sells the gold in future, then he is liable to pay income tax on capital gains
2. Received from any other person: If the gold is received from any other person who is not an relative, then the recipient is liable to pay taxes @ slab rates if the gold received during financial year is more than Rs 50000 under the head Income from other sources.

6. Tax Saving on Sale of Gold

Taxpayer having capital gains under short term cannot save taxes by reinvesting but if the taxpayer is having long term capital gain on sale of gold, then he can reinvest and save the taxes as follows.

Section 86 of IT Act 2025 (Section 54F of IT Act 1961):

1. This section can be claimed either by individuals or HUF.
2. The taxpayer should purchase 1 residential house in India within 1 year before or 2 years after date of sale of gold or construct 1 residential house within 3 years from the date of sale of gold.
3. Quantum of Exemption:
   • If cost of new residential house ≥ Net Sale of Consideration of Gold, entire capital gains is exempt
   • If cost of new residential house < Net Sale of Consideration of Gold, only proportionate capital gains is exempt
4. The Taxpayer should not own more than one residential house on the date of sale. The Taxpayer should not purchase any residential house within 2 years or construct residential house within 3 years from the date of sale

7. Gold Monetisation Scheme (GMS), 2015

• Gold Monetisation Scheme (GMS) was announced by Government of India in September 2015.
• The purpose of Gold Monetisation scheme is to mobilize the idle gold in the country and put into productive use.
• Gold Monetisation scheme provides an opportunity to the customers to earn interest income on their idle gold holdings.
• Benefits of GMS:
  
  
  • Earns Interest on Idle Gold: Depositors can earn interest upto 2.5% p.a. on the idle gold which would otherwise sit as unused in lockers or homes without financial returns
  • Safety and Security: Gold is stored in government-backed banks, eliminating risks of theft or loss associated with keeping it at home or in private lockers.
  • No Storage Costs: If the gold is invested in GMS, there will be no need to pay locker charges or incur expenses.
  • Improves Liquidity: Converts idle gold into a productive asset, injecting liquidity into the financial system as banks use deposited gold for lending or other economic activities.
  • Enhances Banking Sector Role: Strengthens banks’ ability to offer gold-based financial products and loans, diversifying their portfolios and revenue streams.
• Process of GMS
  
  
  • The Gold Monetisation Scheme (GMS) process in India involves depositing idle gold (minimum 10 grams) at authorized banks or Collection and Purity Testing Centres (CPTC).
  • The gold is tested for purity, melted into standard 995 fineness bars, and credited to a Gold Savings Account with a certificate issued
  • Depositors choose a tenure (1–15 years) and earn interest (up to 2.5% for long-term), while banks utilize the gold for loans or domestic supply.
  • At maturity, redemption is in gold or INR, with interest paid in INR, and premature withdrawal is allowed under specific conditions.
• Eligible Persons:
  
  

  The following resident persons are eligible to make deposit in Gold Monetisation Scheme

  • Individuals / HUF
  • Partnership Firms
  • Trusts including Mutual Funds / Exchange Traded Funds registered under SEBI (Mutual Fund) Regulations
  • Companies
  • Charitable institutions
  • Central Government / State Government / any other entity owned by Central Government or State Government
• Minimum and Maximum Deposits
  
  
  • Minimum Deposits - 10 grams of raw gold (bars, coins, jewellery excluding stones and other metals)
  • Maximum Deposits – No Limit
  NOTE

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  The quantity of gold deposited will be expressed up to three decimals of a gram (ex: 10.543 gms of gold)

• Types of Deposits:
  

  There are 3 types of deposits

  Type of Deposit	Tenor	Rate of interest given by banks	MinimumLockinPeriod
  Short Term Bank Deposit (STBD)	1-3 years	0.5% to 0.75% (Varies from bank to bank)	1 year (Varies from bank to bank)
  Medium Term Government Deposit (MTGD)	5-7 years	2.25% p.a. (Simple Interest annually or cumulative interest at time of maturity compounded annually)	3 years
  Long Term Government Deposit (LTGD)	12-15 years	2.50% p.a. (Simple Interest annually or cumulative interest at time of maturity compounded annually)	5 years

• Taxation: The interest earned under GMS and maturity amount received under Gold Monetisation scheme is completely exempt from Income Tax.