On 23rd July the Indian government announced the budget for this year which brought several significant changes. These changes included the reduction in the custom duty on gold which earlier was 15% and now the government has set it at 6%. This significant change that the government brought to the taxation of gold investment has had a huge impact on our personal finances. We all know that Gold is a precious metal and whether you buy it specifically for investment or you buy it because you love wearing gold jewellery, in both cases you have to bear this impact.
Read More: Understanding the Value of Gold Jewellery
So, it's time that you clearly know about these changes and how these will affect the personal finances of the common man.
Significant Changes in Taxation
Marvellous Miracle Diamond Ring Decrease in Holding Period for LTCG
Do you know what is LTCG – It is long-term capital gains and when it comes to physical gold, all the entities that qualify as LTCG will now get a holding period of 24 months. Earlier this period used to be to 36 months which now has reduced to 24. So, if you are an investor in physical gold, you can enjoy the benefits of LTCG rates on your investment.
Flat LTCG Tax Rate
If you talk about the pre-budget announcement period, the LTCG rate on gold was 20% but after the budget declaration, the government has reduced the rate to 12.5%. Along with this, the government has also removed the indexation benefits which is responsible for adjusting the purchasing price for inflation. So, this change will give a slight elevation to the taxable gains when you are breathing in an inflationary environment.
Read More: Why Gold Matters: Everything You Need to Know About Gold
Changes in Funds & Gold ETFs:
If you include the gold ETFs and mutual funds, we can possibly say that a common person’s gain from these entities will be taxed similarly to that of physical gold. The STCG - short-term capital gain has a 20% tax slab and the LTCG has the 12.5% which indicates that people who fall in the higher income section have more tax-efficient choices than before.
Reduction in Customs Duty
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This was indeed a very important declaration to reduce the customs duty on gold from 15% to 6% only. With this step, the overall price of gold will slash to some level giving people the opportunity to buy more and helping the jewellers to have good sales.
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Influence Of Gold Taxation Laws on Different Gold Investments
Physical Gold
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If you are planning to invest in buying physical gold, you can enjoy the benefit of a lower LTCG tax rate which is 12.5% now.
Sovereign Gold Bonds
The customs duty has been reduced which directly indicates that you may get low returns on gold sovereign bonds as it is directly linked to the prevailing gold prices. So, as an investor in SGBs, you may not get the much-expected returns because of this big change.
Mutual Funds & Gold ETF’s
If you belong to a high tax-paying slab, then the gold ETFs and mutual funds will help you save more because of the lower tax rates. So, it's time to encourage good asset allocation as well as increase the score of inflows into such entities.
Strategies That Will Help You Invest Smartly
If you are looking for ways that will help you efficiently navigate these changes, follow the below-mentioned tips:
You may have heard about SIP and you can adopt a similar approach to increase your spend in gold investments and not fall prey to market volatility.
It's time for a diversified portfolio that comes with a mix of equities, assets, and gold to handle the risk and optimize the positive returns.
There is a need to have a long-term perspective of focusing on the real potential of gold and hold that against economic uncertainties and inflation.
Be Smart & Invest in Physical Gold with GIVA
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As the new tax laws are bringing endless opportunities and challenges for the people who want to invest in gold, GIVA is helping people buy physical gold at newly slashed prices. We make sure that our customer gets the latest designs, excellent quality, and prices that can make your pocket keep smiling. Moreover, our prices are aligned with the reduced customs duties so, you do not have to worry about buying the gold according to the old tax slabs. So, hurry up & shop now!