Selling Gold? Know How Much Tax You'll Pay Based on Holding Period and Profit Type

When you sell your gold jewellery, the profit you earn doesn’t come tax-free. The income generated from the sale of gold falls under the category of capital gains in the Income Tax Act. Depending on how long you held the gold before selling it, the gain is classified as either short-term or long-term, and the tax treatment varies accordingly.

Short-Term vs Long-Term Capital Gains on Gold

If you sell your gold within two years of purchase, the profit is treated as a short-term capital gain (STCG). This amount is added to your total income and taxed as per your applicable income tax slab rate. In other words, if your income falls under the 20% or 30% tax bracket, your gold profit will also be taxed at the same rate.

On the other hand, if you hold the gold for more than two years before selling it, the profit is considered long-term capital gain (LTCG). The government levies a 20% tax on such gains after allowing indexation benefits — which means the purchase price of your gold is adjusted for inflation before calculating the taxable profit. This helps in reducing your overall tax liability.

Example of Gold Tax Calculation

Suppose you bought gold worth ₹2,00,000 in 2021 and sold it in 2025 for ₹2,80,000. Since the holding period exceeds two years, it qualifies as a long-term gain. After applying indexation, your taxable profit might reduce to around ₹60,000, and you’ll need to pay 20% tax (₹12,000) on that indexed amount.

However, if you had sold the same gold within one year, the entire ₹80,000 profit would be added to your income and taxed as short-term gain based on your slab rate.

What if You Inherited or Received Gold as a Gift?

If you received gold as a gift or inheritance, you don’t pay tax at the time of receiving it. But when you sell it later, the original owner’s purchase date and cost are considered for determining whether it is a short-term or long-term gain. This rule ensures that the actual period of ownership is accounted for, even if the gold changed hands.

Exemptions You Can Claim

Under Section 54F of the Income Tax Act, you can claim exemption on long-term capital gains from gold if you reinvest the sale proceeds in a residential property within the specified period (one year before or two years after the sale). This benefit can help you save significantly on taxes.

Key Takeaways

• Selling gold jewellery is taxable under capital gains.

• Up to 2 years of holding → Short-Term Capital Gain, taxed as per your income slab.

• More than 2 years of holding → Long-Term Capital Gain, taxed at 20% with indexation.

• Inherited or gifted gold uses the original purchase date and cost for tax calculation.

• You can save tax by reinvesting in property under Section 54F.

Before selling your gold, it’s wise to keep records of your purchase invoices and sale receipts. These documents are essential for accurate tax calculation and to claim eligible exemptions.