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People’s interest in digital gold has increased a lot in recent times. However, still many people are unaware of the maths of Tax On Digital Gold. Like physical gold, digital gold also attracts various types of taxes. To put it simply, whether gold is digital or physical, it will become a tax liability.
This is how capital gains tax looks like
The profit made on selling the digital gold kept in the digital vault within 3 years is considered as short term capital gain tax. This capital gain is added to your total income and taxed as per your tax slab. On the other hand, selling after 3 years is considered as long term capital gain. This is taxed at 20 per cent after indexation benefit.
GST on purchase
At the same time, there is 3 percent GST on buying digital gold. In such a situation, you will have to pay GST every time you buy digital gold through Google Pay, Paytm and PhonePe etc. There is a making charge and delivery fee for converting digital gold into jewellery.
tax on paper gold
Apart from digital gold and physical gold, another way of investing in gold is paper gold. Redemption or sale of units of gold ETFs and gold mutual funds, except Sovereign Gold Bonds (SGBs), is taxed at the same rate as physical gold.
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Rules are different in case of bonds
The tax rules are different in the case of sovereign gold bonds. In this, the investor gets an interest of 2.5% per annum, which is added to the income of the investor and taxed according to the slab. The maturity period of Gold Bond is 8 years. There is no tax on capital gains after holding till maturity.
Investors can redeem the Sovereign Gold Bond pre-mature after 5 years. If the bond is sold between 5 to 8 years, then the profit will be considered as long term capital gain. This will be taxed at 20 per cent after indexation benefit. When in demat form, the bonds can be traded on the stock exchange. Long and short term capital gains tax is applicable on this depending on the holding period.
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