New Delhi: As Diwali draws near, homes and markets across India come alive with the sparkle of diyas, colorful lanterns, and festive excitement. Among the many traditions that mark this joyful season, buying gold remains a favourite for many, seen as a symbol of prosperity and good luck. Whether it’s coins, jewellery, or small gold bars, these purchases hold both emotional and financial value. But with gold prices hitting record highs, it’s essential to understand how it’s taxed before making your festive purchases or gifting it to loved ones.
Buying Gold for Yourself
When you buy gold for your personal use whether it’s jewellery, coins, or bars, you don’t have to pay any income tax at the time of purchase. However, Goods and Services Tax (GST) still applies: 3 per cent on the value of gold and an additional 5 per cent GST on making charges. The tax angle really comes into play later, either when you sell your gold or receive it as a gift.
Gifting or Receiving Gold This Diwali
Exchanging gold gifts during Diwali is a cherished tradition, but it’s important to know the tax rules that come with it. According to Section 56(2)(x) of the Income Tax Act, any gift be it gold, jewellery, property, or shares can be taxed as “Income from Other Sources” if received without payment.
However, there’s good news: gold received from close family members such as your parents, spouse, siblings, children, grandchildren, or in-laws is completely tax-free, regardless of its value. So, if your festive gold gift comes from a relative this Diwali, you don’t have to worry about paying any tax on it.
Selling Your Gold: What You Should Know
If you plan to sell your gold in the future, the tax you pay will depend on how long you’ve owned it. When you sell gold within three years of buying it, any profit you make is treated as a short-term capital gain—this amount gets added to your total income and is taxed as per your income tax slab.
But if you sell the gold after three years, the profit becomes a long-term capital gain, taxed at 20 per cent with indexation benefits. Indexation adjusts your purchase cost for inflation, helping reduce your taxable amount. Also, remember to keep your purchase invoice or gift receipt safe—it’s useful for proving ownership, calculating gains, and handling any tax-related queries later.