Know how digital gold is taxed

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People’s interest in digital gold has increased a lot in recent times. However, many people are still unaware of the tax calculations on digital gold. Let us explain and give a solution to their confusion. Just like physical gold, digital gold is also taxed.

The profit on selling digital gold kept in digital vault within three years is considered as short term capital gain.  This capital gain is added to your total income and will be taxed according to the tax slab. Whereas, selling it after three years will be treated as long term capital gain and it will be taxed at 20% after indexation benefit.

There is 3% GST on buying digital gold. So everytime you buy digital gold through any app such as Google Pay, Paytm and Phone Pe, GST will have to be paid. Making charge and delivery fees applies on converting digital gold into physical jewellery.

Apart from digital gold and physical gold, another way to invest in gold is paper gold. Redemption or sale of units of gold ETFs and gold mutual funds, except Sovereign Gold Bonds (SGBs), attracts the same tax as physical gold. 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 mautrity period of the SGB is 8 years. There is no tax on capital gain if held till maturity.

Investors can pre-maturely redeem the sovereign gold bond after 5 years. If the bond is sold between 5 to 8 years, the profit will be considered as long term capital gain. After indexation benefit,  20 per cent tax will be levied on the gains. If in demat form, the bond can be traded on the stock exchange and taxed according to the holding period.