The festive buying, coupled with political uncertainty globally, led to a price surge in (66%) and silver (55%) around Dhanteras.
While many investors rushed in to accumulate more of these precious metals due to the conviction in prices, others wanted to book profits amid the astronomical rise.
Indian households sold at jewellery shops, while savvy investors who had invested in electronic forms such as (ETFs) or (SGBs) took to the stock exchange route, where SBGs worth ₹16.97 crore were traded on the stock exchanges.
However, precious metals, when sold in physical, bonds or other electronic form, are saddled with taxes based on when and how one sells the units.
“SGBs often trade at a 10–15% premium over the prevailing gold price because secondary market buyers also factor in the 2.5% annual interest that accrues on these bonds. While this premium may seem attractive, the on such sales effectively negates most of this perceived benefit,” says Ameet Patel, partner at Manohar Chaudhary & Associates.
How are SGBs Taxed?
While there are different means to invest in these tangible assets, the taxation rules are slightly complex in the case of Sovereign Gold Bonds, which were issued by the Government of India during specific windows, to avoid foreign exchange flow in procuring gold for Indians, given the high demand for the physical metal.
“If held until the 8-year maturity period, the entire capital gain (appreciation in prices) is tax-free,” says Raju Shah, Ahmedabad-based Chartered Accountant.
While gold and silver in the metal form attract taxes irrespective of the holding period, SGBs have a slight tax edge if it is held for an adequate term.
“Tax exemption (if held till maturity), combined with the 2.5% annual interest (taxable), provides a superior after-tax return compared to selling prematurely on exchanges, where both appreciation and sale trigger taxation,” says Patel. That is exactly why the bonds trading with a longer time to maturity are trading higher. Units maturing on November 20, 2025, are trading at ₹11,902 compared to the price of ₹13,908 for the series maturing in February 2032.
Premature exit
While the bonds are issued for an eight-year holding period, there is a premature withdrawal option offered after 5 years, where one can tender the Sovereign Gold Bond units to the and receive the unit values linked to the gold rate as well as the interest accumulated over the period.
So, if you tender these units to RBI, does taxation change?
“In accordance with Section 47(viic), capital gains arising on such redemption—whether at maturity or under premature redemption—are fully exempt for individual investors. Hence, redemption through the RBI (including premature redemption) does not attract any capital gains tax, whereas selling on exchanges continues to be taxable,” says Patel.
Another mode to exit SGBs is through the , where these units are listed for better liquidity. Once you exit, you need to calculate the appropriate amount of and pay.
What are the tax rates?
The taxes would depend on how long you held on to the units before selling them off – the major distinction being the first 12 months. “If one sells the SGB units within the first year after investing, then the entire gain in price appreciation is added to your income and taxed as per your income tax bracket,” says Shah.
However, if you sell it after 12 months, then a long-term capital gains tax of 12.5% is applicable.
Other electronic gold forms
Apart from SGBs, gold and precious metals like silver are available in the form of exchange-traded funds through the mutual fund channel.
A similar tax rate is applicable when an individual sells ETF units, too. “Gold and Silver ETFs do not qualify for any exemption — every sale, irrespective of holding period, triggers capital gains tax. Units held for 12 months or less are taxed at the investor’s applicable slab rate. Beyond the first year of holding, 12.5% long-term capital gains tax without indexation is applicable,” says Ameet Patel, partner at Manohar Chowdhry & Associates.
Hence, one should be careful of the sale date, considering a higher tax liability based on the tax bracket. “Those who want to trade in the metal or bonds and are in the higher tax bracket they should wait for the investment to turn at least a year old to sell, as the gains would turn long-term and a lower tax rate of 12.5% is applicable,” says Karan Batra, managing partner at KN Global Consultants.
The time period and the instrument used to invest, too, should be assessed, as the holding period may be different. For instance, “Silver ETF fund of funds (FoF) is treated slightly differently, requiring a 24-month holding period for LTCG eligibility,” says Patel.
Is inflation adjustment allowed?
No, the inflation adjustment, also called as indexation benefit, is no longer available on gold and silver investments.
“Even though the has been removed during the Union Budget alterations made in 2024, a lower tax rate and shortening of the long-term window would compensate for the indexation loss,” says Batra.
The taxes were lower only if one sold the SGB units or gold, silver after three years of holding, which has now shrunk to 12 months.
Tax on interest payment
Just like one receives on bank funds and bonds, under SGBs, too, one receives an interest of 2.5% each year.
“The interest that is received is taxed as per the tax slab. One needs to mention interest earned on SGBs in the ‘other income’ column in your tax return and pay the appropriate tax,” says Shah.
Interest here is accrued twice annually. So you need to either follow an accrual method or a receipt method. For instance, you can either pay tax every year on interest accumulated twice in a financial year or as total interest received at the time of maturity.
How can you save tax?
Usually, when someone sells any capital asset then the gains up to ₹50 lakh can be invested in government-issued bonds to avoid paying taxes. However, in the case of Sovereign Gold Bond unit sales, these capital gains bonds investments aren’t permitted.
“The capital gains bonds will not help one save tax on gains in gold ETF, silver ETF or sovereign gold bonds,” says Batra.
However, there is a way to still save tax, especially if you have purchased a property recently between tax filing cycles or will be purchasing a house property.
“If you have sold gold jewellery or artefacts, then the entire amount (without any adjustment) can be invested into a house and no tax will be applicable on the sale proceeds as per Section 54 and 54F,” says chartered accountant Mehul Sheth.
This provision hasn’t been amended even after the changes made in the Finance Bill 2025.
So, assume that you sold gold jewellery at ₹10 lakh, whose purchase cost was ₹2 lakh three years prior. Under the long-term capital gain provisions, you would have to pay tax on the gain of ₹8 lakh ( ₹10 lakh sale price- ₹2 lakh purchase price) at 12.5% as per the new provisions.
But instead, you can avoid paying any tax if you invest the entire ₹10 lakh, not just ₹8 lakh of gain, to buy a house property.
“You can even purchase two properties using the gains. However, this option is permitted only once in a lifetime if the gains do not exceed ₹2 crore,” says Sheth.
A window of three years is available to invest in the property after selling gold jewellery.”If you are planning to invest in a house property within three years from the sale date of the gold or silver investments, then you can reinvest the money and get an exemption on tax, under Section 54 (F),” Batra suggests.
(Khyati Dharamsi is a freelance writer who covers personal finance at Mint.)
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.