How much gold you can keep at home? Limits and income tax rules explained

Gold, the value of the precious yellow metal has only risen with time. From  physical gold to bonds to digital to SGBs, buying gold is believed to be auspicious, especially during festivals in India. Our fascination with the yellow metal fail to diminish, but are you aware of the rules, limits and taxes for storing various forms of gold? Even from the investment point of view, apart from mutual funds, SIPs, stocks, people prefer to invest in gold also.

So, let’s take a look at the limits, taxes and rules for storing various forms of gold.

Physical gold

Ravi Singh, Vice President & Head of Research at Share India said as per the latest circular of CBDT to its officials to not to seize any gold ornaments and jewellery upto a certain level like a married woman can hold 500 gms of physical gold in the form of jewellery and ornaments, 250 gms for an unmarried woman and only 100 gms for a man irrespective of marital status. 

“If you sell the physical gold within 3 years of buying, a short term capital gains tax will be levied if sell after 3 years long term capital gains tax will be levied. For the short term, the capital gains will be added to the total taxable income and taxed at the income tax slab rate. For the long term, your capital gains will be taxed at 20% plus a 4% cess and additional surcharge if applicable. Additional a GST of 3 percent will have to be paid on purchase of physical gold,” explained Ravi Singh.

In India, most of us invest in physical gold and jewellery, but that’s not the best way to invest in gold said Amit Gupta, MD, SAG Infotech. Mentioning the reason behind the same, Gupta said the high cost involved, such as making charges, tax (GST) on purchases, storage and insurance cost, agent commission, etc.

Digital gold

Amit Gupta, MD, SAG Infotech said in terms of return on investment, digital gold investment is almost always better than physical gold.

When investing in digital gold, you only have to pay GST on the purchase price and some other minor charges, depending on where you invest, he added.

Ravi Singh said there’s no upper limit on purchase of digital gold. However, the maximum limit to buy gold in a single day is 2 lakh. 

“LTCG is applicable on selling digital gold after 3 years at a rate of 20% plus cess and surcharge. However, returns on digital gold held for less than 3 years are not taxable directly,” said Singh.

Sovereign Gold Bond (SGB)

The maximum limit for investment in SGB is subscribed as 4 kgs annually for individuals. According to Amit Khare, AVP- Research Commodities, Ganganagar Commodity, the annual ceiling will include bonds subscribed under different tranches during initial issuance by Government and those purchased from the secondary market. The ceiling on investment will not include the holdings as collateral by banks and other Financial Institutions.

If you buy sovereign gold bonds or SGBs, you do not even have to pay a GST, which means there are no visible charges.

A SGB receives an interest of 2.5% per annum, which is added to the taxable income and charged as per the slab. However, any profits through SGBs after 8 years are tax free.

Gold ETFs and mutual funds

For gold ETFs and mutual funds, LTCG is applicable when held for over 3 years. The rate is also the same – 20% plus 4% cess. and for investments less than 3 years, the gains are added to your taxable income and taxed as per your IT slab, said Ravi Singh

Different gold investment instruments have different costs, minimum and maximum limits and tenure periods. So, make sure to do your diligence before investing.

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