Indians thronged jewellery shops, rushed to purchase exchange traded funds (ETF) and purchased digital gold units (currently unregulated) through e-commerce platforms, jewellers and refiners owing to a near doubling of import duty and associated cess on gold purchases.
Starting May 13, 2026, the basic customs duty on gold was enhanced to 10% (5% earlier), while the agriculture, infrastructure and development cess was raised to 5% (1% earlier). This led to an increase in overall gold import duty to 15%, which was the rate in 2022.
This followed the earlier nudge by the Prime Minister to avoid gold purchases for a year to preserve the foreign exchange reserves of the country, which are strained by hefty oil imports, and also curb the depreciation of Indian currency.
But the Indian consumers declared their affinity to by consuming gold in physical and electronic form, owing to price sensitivity, low availability and pre-wedding purchases. India consumes 700-800 tonne of gold yearly – 90% is imported from abroad gaining it the position of second most imported item. This leads to a 9% drain on the exchequer, which totalled $72 billion during the financial year 2025-26.
“Gold and jewellery are deeply connected with India’s economy, traditions, and savings culture,” says Avinash Gupta, Vice Chairman, All India Gems and Jewellery Domestic Council. While there is no major auspicious festival to purchase gold in the month of May, the import duty raise became a demand event.
If you purchased gold, how did the import duty change affect your gold purchase locally? The import duty prices are included by the jeweller in the gold prices, which also fluctuate based on other conditions. One doesn’t separately have to pay the import duty over and above the price of gold paid for purchase of jewellery or gold coins in the physical form. The prices of – offered by mutual funds in India – however, would continue repricing with a lag to reflect the import duty rise.
With rise in import duties, rupee denominated prices of precious metals rose significantly. If one was purchasing 10 gram 24K gold at ₹1,47,160, the price of gold shot up by 10% after the import duty announcement, to ₹1,62,120 per 10 gram even though the day’s purchase for May 13, 2026, was being consumed from the existing reserves in the country.
“The combined impact of rupee devaluation and higher import duties has triggered a sharp rise in domestic gold prices, creating uncertainty in the retail market. While gold continues to remain a trusted asset for Indian consumers, discretionary purchases are witnessing a slowdown, especially in non-essential and luxury categories,” says Rajiv Popley, director – Popley Group.
The price rise in the yellow metal is also reinforcing gold as a good investment option and raising the investment demand in the metal. “The duty revision may lift retail jewellery prices in the near term, and customers – particularly first-time and investment-led buyers – will take a moment to recalibrate,” says M P Ahammad, Chairman, Malabar Group.
Rising prices and outlook
Global buying by both individuals and central banks have been at historical highs as the faith in currencies is on shaky ground. After global net gold purchases of ~1,237 tonnes in the year 2025, World Gold Council expects another 750–850 tonnes of buying in 2026.
“Historically, Indian investors tend to increase their participation when the metal appreciates and delivers higher returns compared to many other commodities and traditional investment avenues,” says Popley.
But should one buy gold at such elevated levels? There is steam left in the metal and one can accumulate during dips indicate fund managers.
Hardaman Singh Seth, Head Business – ETF, Mirae Asset Investment Managers (India), says, “Near term, gold seems attractive from risk reward point of view because of geopolitical uncertainty, large US fiscal deficits and central banks reducing reliance on the dollar suggesting that sustained dollar strength is unlikely. Unresolved Russia Ukraine tensions, continued instability in the Red Sea shipping corridor, and persistent US China strategic rivalry (trade, technology and Taiwan related risks) continue to reinforce gold’s role as insurance against tail risks and policy mis-steps.”
Light weight jewellery
However, affordability is a challenge given the high prices. Hence, jewellers anticipate near-term moderation in discretionary purchases and a shift towards lighter jewellery purchases.
“The durability and resale value of lower karatage pieces differ from 22k or 24k jewellery, so buyers should ensure proper hallmarking and certification to safeguard their investment,” says
Rajesh Rokde – Chairman – All India Gem and Jewellery Domestic Council.
Even though the jewellery is light weight, it should still be functional and not give way. Hence one should be mindful of the purchase. “Customers should check the structural integrity of the piece—clasps, prongs, and links must be sturdy. It’s also important to ensure that the design suits long-term wear and that the finishing is of high quality. A well-crafted lightweight piece should feel as reliable as a heavier one,” says Neil Sonawala, managing director of Zen Diamond India.
Exchange of old Gold
While exchange of old gold for new jewellery will become the dominant mode of purchase, don’t just head to any jeweller without the mandatory documents for selling the old gold.
“For resale or buyback, jewellery typically needs to meet certain conditions—original invoices, certificates, and the piece being in good condition are key requirements. The purity of gold and authenticity of diamonds also play a major role. Most jewellers have clearly defined buyback terms, which may include deductions on making charges and current market rates,” says Sonawala.
Tread with caution on diamond jewellery
During festive season and wedding purchase period, jewellers have been offering hefty discount on diamond jewellery compared to gold. Often there are zero making charge options on diamond jewellery as well. “Diamond jewellery allows for more flexibility in pricing because the overall cost includes design, craftsmanship and not just the metal. Pure gold jewellery is closely tied to daily gold rates, leaving limited scope for discounts without affecting margins,” explains Sonawala.
However, the better “making charge” discount shouldn’t be considered a good bait to purchase diamond jewellery. One should be cautious as the exchange value of gold and diamonds are different. With mandatory hallmarking, though jewellers in 280 plus districts are now comfortable with exchanging and buying back pure gold jewellery, the same is not applicable for diamond jewellery.
“Jewellery containing a mix of natural and lab-grown diamonds may not always be eligible for standard buyback, or the valuation may differ significantly,” says Sonawala.
Tax Implication
But when one sells old gold jewellery to convert into a new purchase, don’t take into account the entire appreciation in the metal prices as your own. There is a significant tax implication, whether one sells old gold jewellery or ETF units to convert into physical gold jewellery.
If you sell gold within a year of purchase, the entire gain is added to your income and taxed at the income tax slab rate. Surcharge too is levied on the tax applicable. But the rate changes if the physical gold is held for more than two years.
“Selling inherited or long-held gold jewellery and coins can trigger a capital gains tax liability that many taxpayers overlook entirely. If the asset has been held for more than 24 months, the gain qualifies as a Long-Term Capital Gain and is taxed at 12.5% without the benefit of indexation — a change brought in by the Finance Act, 2024, which significantly altered the calculus for gold held prior to July 23, 2024,” says Paras Savla, partner at KPB and Associates.
Savla warns taxpayers to be careful about documents – including bills, valuation reports, or inheritance records. “The absence of proof of acquisition cost can result in the entire sale proceeds being treated as income,” he says.
The good news is that the equity markets have been making losses and individuals are booking properties in their names. A way to offset the exceptional gains from gold and silver sales would be to reinvest the gains and reduce the linked taxes from precious metal sales.
“Those owning only one residential property can reinvest the entire net sale consideration from the gold in purchase of a residential house property within two years, or construct a house within three years of the sale of gold jewellery then the entire long-term capital gain stands exempt,” says Savla. However, there is an overall cap of ₹10 crore on the investment.
Paper gold sales
But these tax laws don’t apply if you have sold or are planning to sell your gold mutual fund units held either in exchange traded funds (ETF) or fund of funds (FoF).
“Gold and Silver ETFs listed on the stock exchange are treated on par with other listed securities and a holding period of just 12 months suffices to qualify for long-term capital gains treatment,” says Savla.
However, those holding gold or silver FoFs, must hold the same for 24-month minimum as these are considered as unlisted securities and would turn long-term only after 24-months.
Despite current challenges, the long-term outlook for gold in India remains resilient due to its cultural significance, liquidity, and enduring investment appeal, say jewellers, who are demanding a role in unlocking the value of idle gold through Gold Monetisation Scheme mobilisation.