Gold Surges Amid Market Volatility. Here’s How It’s Taxed Across Investment Formats

Gold prices have surged to an unprecedented $4,000 per ounce. This marks a 53 per cent increase in gold prices in 2025. Some of the factors behind this surge are economic instability, a weakened dollar, and rising geopolitical tensions. As such, gold continues to act as a hedge against volatile markets.

So, if you invest in gold, here are the tax implications you should be aware of.

Rules On Holding Gold 

An important point for holding gold as an asset is to note that there is no restriction on possessing gold jewellery or ornaments, provided they are obtained from a legitimate income source and the taxpayer can explain the source. This source includes gold acquired from inheritance as well. However, the Central Board of Direct Taxes (CBDT) has suggested some indicative limits.

“The CBDT has recommended limits of gold holding by a normal taxpayer. For unmarried women, the prescribed gold holding limit is 250 grams, whereas it is 500 grams for married women and 100 grams for men and children, respectively. Hence, it is very important that the accounting for gold is done diligently,” says Vivek Jalan, partner, Tax Connect Advisory Services.

Taxation Of Physical Gold 

When purchasing physical gold, investors are required to pay a three per cent goods and services tax (GST) on the gold value, and a five per cent GST on making charges for jewellery. “Upon sale, the holding period determines the nature of capital gains. If the gold is held for 24 months or less, any profit is classified as short-term capital gains (STCG) and taxed according to the investor’s applicable income tax slab. If held for more than 24 months, the gains qualify as long-term capital gains (LTCG), taxed at a flat rate of 12.50 per cent (without indexation benefits),” says Mohit Mansharamani, senior associate, SKV Law Offices.

Taxation Of Digital Gold 

Digital gold follows identical taxation rules to physical gold, creating parity between traditional and modern investments. When purchasing digital gold through any platform, you pay three per cent GST on the transaction value. The capital gains taxation is similar to that on physical gold. Holdings of 24 months or less face STCG tax at slab rates, while investments held beyond 24 months attract 12.50 per cent LTCG tax without indexation.

Taxation Of Gold ETFs

For listed gold exchange-traded funds (ETFs), short-term up to 12 months is taxed at slab rates. “Long-term, which is beyond 12 months, is taxed at 12.50 per cent without indexation as per the rationalised capital gains framework,” says Alay Razvi, managing partner, Accord Juris.

Taxation Of Sovereign Gold Bonds  

Sovereign Gold Bonds (SGBs) offer the most tax benefits among all gold investment options, particularly for long-term investors.

“If you hold SGBs till maturity, which is eight years, then the capital gains arising from the sale of these bonds are exempt from tax; such a benefit is not available to investments in other forms of gold,” says Ritika Nayyar, partner, Singhania & Co.

“Also, the semi-annual 2.50 per cent interest is taxable at slab rates, but tax deducted at source (TDS) is not deducted by the issuer, simplifying cash flows compared with other fixed-income-like distributions,” says Razvi.