Gold and silver remain among the most widely used  investment and savings assets in India. Investors can own them in several forms, including jewelry, coins, bars, digital gold, exchange-traded funds, mutual funds and Sovereign Gold Bonds.

Although all of these products provide some form of exposure to precious metals, their tax treatment is not identical.

The tax outcome can depend on:

• the form in which gold or silver is held;
• whether the investment is listed on a recognised stock exchange;
• how long it is held;
• whether the gain is short-term or long-term; and
• whether a special exemption applies.

For transactions during Tax Year 2026–27, investors should therefore identify the type of investment before calculating capital-gains tax.

Quick Tax Summary for 2026–27

The Income Tax Department's current capital-gains framework uses a 12-month period for listed securities and a 24-month period for most other assets. Long-term capital gains on assets outside the special equity provisions are generally taxed at 12.5%.

1. Tax on Physical Gold and Silver

Physical gold and silver include:

• jewelry;
• coins;
• bars; and
• bullion.

For an investor holding these assets as capital investments, the holding period is generally 24 months.

If the asset is sold after being held for 24 months or less, the gain is treated as short-term capital gain and is generally added to taxable income and taxed at the applicable income-tax slab rate.

If held for more than 24 months, the gain is generally treated as long-term capital gain and taxed at 12.5%, subject to applicable surcharge and cess.

The earlier indexation benefit that many investors associate with gold is no longer generally available under the post-July 2024 capital-gains framework.

Example

Suppose an investor buys gold worth ₹5 lakh and sells it after three years for ₹6.5 lakh.

The capital gain is:

₹6.5 lakh – ₹5 lakh = ₹1.5 lakh

Because the holding period exceeds 24 months, the gain would generally be treated as a long-term capital gain and taxed at the applicable LTCG rate.

This is a simplified example and does not include transaction expenses, surcharge or cess.

2. GST on Physical Gold and Silver

GST is an acquisition cost, not a capital-gains tax.

Gold and silver products falling under the relevant precious-metal headings generally attract 3% GST.

An important point for jewellery buyers is that CBIC has clarified that GST is payable at 3% on the total transaction value of jewellery, even when making charges are shown separately on the invoice.

The commonly repeated statement that a retail jewellery buyer automatically pays “3% GST on gold plus 5% GST on making charges” is therefore misleading.

The 5% rate referred to in CBIC guidance relates to qualifying job-work charges in the manufacturing chain.

3. Tax on Digital Gold and Silver

Digital gold and digital silver represent precious metals purchased through an online platform rather than through an exchange-traded fund.

For capital-gains purposes, they are generally treated more like physical precious metals than listed ETFs.

Therefore:

Held for 24 months or less:

The gain is generally short-term and taxed at the investor's applicable slab rate.

Held for more than 24 months:

The gain is generally long-term and taxed at 12.5%.

Digital precious-metal purchases can also involve GST at the purchase stage.

Investors should additionally understand that digital gold is structurally different from a regulated mutual fund or exchange-traded fund. Platform arrangements, custody and redemption terms should be reviewed separately from tax considerations.

4. Tax on Gold ETFs and Silver ETFs

Gold and Silver ETFs provide exchange-traded exposure to precious-metal prices.

Because these ETF units are listed securities, the holding-period rule is shorter than for physical gold.

A listed Gold or Silver ETF is generally considered:

• short-term when held for 12 months or less;
• long-term when held for more than 12 months.

Short-term gains are generally taxed at the applicable slab rate because Gold and Silver ETFs do not qualify for the special equity-oriented fund treatment under the short-term equity capital-gains provision.

Long-term gains are generally taxed at 12.5% without indexation.

This difference in holding period is important.

An investor selling physical gold after 18 months would generally have a short-term gain, while an investor selling a listed Gold ETF after the same 18-month period may have a long-term gain.

5. What Changed for Gold and Silver Mutual Funds?

Taxation of non-equity  mutual funds has changed significantly over recent years, so older online articles can be misleading.

Section 50AA previously captured a much broader range of non-equity mutual funds.

From the relevant 2026 tax framework, the definition of a Specified Mutual Fund is focused on funds investing more than 65% in debt and money-market instruments, or funds investing at least 65% in units of such debt-oriented funds.

As a result, a conventional gold-oriented or silver-oriented fund is not automatically treated as a debt-oriented specified mutual fund merely because it is not an equity fund.

For a typical unlisted Gold or Silver mutual fund/Fund of Funds, the general holding-period framework can therefore result in:

• 24 months or less: short-term;
• more than 24 months: long-term.

Long-term gains are generally taxed at 12.5%, while short-term gains are generally taxed at the applicable slab rate.

However, investors should verify the actual scheme structure because taxation depends on the legal classification and portfolio of the particular fund.

6. Sovereign Gold Bonds: Important 2026 Change

Sovereign Gold Bonds have a special tax rule.

From April 1, 2026, the capital-gains exemption at redemption is available only when:

1. the investor is an individual;
2. the individual subscribed to the SGB at the time of original issue; and
3. the bond is held continuously until redemption on maturity.

The Income Tax Department's Budget 2026 FAQ specifically states that the exemption does not apply to SGBs purchased in the secondary market and does not apply to premature redemption.

This is an important change because older articles often state simply that “SGB redemption is tax-free.”

That statement is no longer complete for Tax Year 2026–27.

If an SGB is sold on an exchange instead of qualifying for the maturity exemption, normal capital-gains rules can apply.

Because an exchange-listed SGB is a listed security, the 12-month listed-security holding-period rule can become relevant when determining whether the resulting gain is short-term or long-term.

7. Is Gold ETF LTCG Eligible for the ₹1.25 Lakh Equity Exemption?

Generally, no.

The ₹1.25 lakh annual exemption commonly discussed under the special long-term capital-gains rules relates to qualifying equity shares, equity-oriented funds and specified business-trust units.

Gold ETFs and Silver ETFs are not equity-oriented funds merely because they trade on a  stock exchange.

Their long-term gains therefore generally fall under the ordinary 12.5% LTCG framework rather than the special equity exemption.

Investors should not confuse “listed security” with “equity-oriented fund.”

8. What Happens When Gold or Silver Is Inherited?

Receiving gold or silver through inheritance does not itself normally create a capital-gains event.

Capital gains become relevant when the inherited asset is subsequently sold.

In many inheritance situations, the previous owner's cost and holding period are relevant when calculating the eventual capital gain.

Therefore, families holding old jewellery or bullion should preserve purchase invoices, valuation records and inheritance documentation wherever possible.

If the original purchase dates or values are very old, additional tax rules may apply and professional advice may be useful.

9. Common Tax Mistakes to Avoid

A few mistakes appear repeatedly in gold and silver tax discussions.

Using the old 36-month holding period:

For current transactions, physical gold and silver generally use a 24-month threshold.

Assuming all gold investments have identical tax rules:

Physical gold, ETFs, mutual funds and SGBs can have different holding periods or exemptions.

Treating Gold ETFs like equity ETFs:

Gold ETFs are listed, but they are not equity-oriented funds.

Assuming SGB redemption is always tax-free:

From Tax Year 2026–27, the exemption has tighter conditions.

Applying old indexation rules:

The current LTCG framework generally uses 12.5% without indexation for these assets.

Ignoring purchase records:

Documentation can become important when calculating capital gains, particularly for physical or inherited gold.

Which Gold or Silver Product Is Most Tax-Efficient?

Tax should not be the only factor used to choose an  investment.

An investor should also consider:

• liquidity;
• costs;
• tracking difference;
• storage;
• counterparty or platform risk;
• investment horizon;
• ease of buying and selling; and
• the purpose for owning precious metals.

For example, jewellery may provide personal utility but includes design and retail costs. ETFs may provide easier trading and shorter long-term holding periods. SGBs can have a special maturity exemption when all conditions are satisfied.

The most suitable option therefore depends on the investor's circumstances rather than on one tax rate.

Final Takeaway

Gold and silver taxation in India became simpler in some respects after the capital-gains reforms, but different investment formats still require different treatment.

For Tax Year 2026–27, the broad framework is:

Physical and digital gold/silver:

More than 24 months for long-term treatment.

Listed Gold and Silver ETFs:

More than 12 months for long-term treatment.

Typical Gold/Silver  mutual funds or FoFs:

Generally more than 24 months for long-term treatment, subject to the scheme's classification.

Long-term capital gains:

Generally 12.5% without indexation.

Short-term capital gains:

Generally taxed at the applicable slab rate.

Sovereign Gold Bonds:

Capital-gains exemption at maturity is now conditional on original subscription by an individual and continuous holding until maturity.

Because tax rules can change and individual situations differ, investors should verify the latest provisions before filing their return.

Disclaimer: This article is for educational and informational purposes only. It does not constitute tax, legal or investment advice. Tax treatment depends on individual circumstances, asset classification and applicable law. Readers should refer to the Income Tax Department, CBIC and other official sources or consult a qualified tax professional before making tax decisions.