Synopsis: The world wars and uncertainty prompt investors to invest in gold and silver. The article describes the taxation of capital gains in India among various precious metal investments under the 2026 rules, that will help investors make wiser and tax-efficient decisions in treacherous marketplaces.
In 2026, once again gold and silver are placed at the centre spot as the increasing geopolitical tension and the continuous Middle East conflict creates an influx of investors towards the safe-haven currencies. As the world is uncertain, accompanying a sharp rise in the prices of precious metals, a lot of investors in India are cashing in their profits but tax consequences are attached to these gains.
Capital gains on gold and silver are taxed differently whether in a physical form, ETFs or digital assets, depending on the time of holding as well as the nature of investment. Knowledge of the new tax regulations has become essential with the investors rebalancing their portfolios in the unstable global markets.
1. Gold and Silver ETFs
- Taxation of the Gold and Silver ETFs is subject to the new capital gains taxation regulations in 2026. Profit obtained on the sale of ETF units is regarded as capital gains income.
- When the units of either Gold or Silver ETF are sold or redeemed before 12 months of the purchase date the profit is classified as the Short-Term Capital Gain (STCG) and they are included in the total taxable income of the investors.
- In case ETF units are sold after 12 months, then profit is considered as Long-Term Capital Gain (LTCG) and is taxed at a flat-rate of 12.5% with due surcharge and health and education cess.
- The new taxation regime does not allow indexation benefit, i.e. the inflation adjustment will not be applied to lower the taxable gains.
- There cannot be any Tax Deduction at Source (TDS) in the case of resident investors being sold Gold or Silver ETFs in stock markets.
- The ETF investments can be offset capital losses; any loss that is not adjusted can be carried forward up to 8 years.
- April 1, 2026 SEBI has implemented a valuation reform according to which the NAVs of Gold and Silver ETFs will be determined based on domestic spot prices, which enhances the transparency of prices, but does not affect the taxation rates.
2. Gold and Silver FOFs
- Gold and Silver FoFs do not own metals; they are indirectly invested in Gold or Silver ETF. Taxation is done according to taxation rules of non-equity mutual funds, which will be in effect in 2026.
- Under the condition that the Fund of Fund units are sold in less than 24 months since the time of purchase, the gains will be considered as the Short-Term Capital Gains (STCG) and included in the total income to tax based on the income tax slab of the investor.
- When FoF units are disposed of after a period of over 24 months the gains are treated as Long-Term Capital Gains (LTCG) which are subject to a flat tax rate of 12.5%, with a surcharge and cess.
- Indexation benefit does not exist under the revised system of taxation.
- There is no redemption deduction of TDS on redemption in case of resident investors.
- Losses on FoFs are eligible to be offset against other capital gains and are carried forward up to 8 years.
- Fund of Funds require a longer holding period (24 months) in comparison with ETFs to receive long-term taxation.
Also read: Top 7 Everyday Mistakes That Can Trigger an Income Tax Notice in India
3. Sovereign Gold Bonds
- The interest rate charged to investors is 2.5% per annum and the interest is taxable annually at the prevailing income tax rate.
- The maturity of SGBs is 8 years although they can be prematurely redeemed after the 5th year using the RBI redemption windows.
- The new taxation regulations that will take effect in 2026 will leave capital gains on maturity tax-free only to investors who purchased SGBs on the initial issuance by the government and who held them to maturity.
- Mature Investors that purchase SGBs in the secondary market at stock exchanges are not entitled to tax free maturity gains and they pay capital gains tax.
- In case the SGBs are sold on the stock exchange in less than 12 months the gains are classified as Short-Term Capital Gains (STCG) and taxed at the income tax rate of the investor.
- Provided they are sold after 12 months, gains will be classified as Long-Term Capital Gains (LTCG) and charged at 12.5% in the non-indexed form, with any surcharge and cess.
- This is what causes SGBs to be the most tax efficient gold investment where the investment between original subscription and maturity is tax free whereas secondary market investors are taxed like gold ETFs.
4. Physical reserves of gold and silver
- Physical gold and silver consist of jewellery, coins, bars, bullion and digital gold and are subject to income taxation, and Capital gains tax is imposed on the sale of the metal but not when it is held.
- In the case of sales of physical gold or silver occurring below 24 months (2 years) of purchase date, the profit is classified as Short-Term Capital Gain (STCG) and included in the total income and taxed at the income tax slab rate of the investor.
- When selling physical gold or silver after keeping it longer than 24 months, the profit will be treated as Long-Term Capital Gain (LTCG) and subject to a 12.5% flat tax, as well as surcharge and cess.
- Under the new system of capital gains taxation, indexation benefit is not provided.
- Bullion physical purchase of gold and loans of silver are subject to 3% GST at the time of purchase of such metal and 5% GST in case of jewellery making charges.
- Gift/inherited gold/silver of named relatives is tax free at the receipt date but capital gains tax is payable on the eventual sale of this property with reference to the purchase date of the former owner.
- Digital silver is subject to the same taxation as is the case with physical silver with the 24-month holding requirement.
Conclusion
Taxation has become a major consideration in determining the real returns as global tensions and the current worldwide conflicts keep driving investors into the unassailable safety of gold and silver. Investing in precious metals is never a matter of timing the market, but rather knowing the extent to which you are going to take home after the tax.
Written by Boyapati Sai Jasmitha
