InvestorQ : What is the tax treatment on gold ETFs and is it too high?
Khushi Patel made post

What is the tax treatment on gold ETFs and is it too high?

Anjana Aiyar answered.
3 years ago

Unlike RBI gold bonds that are not subject to capital gains tax on redemption, the Gold ETFs are subjected to capital gains tax when it is redeemed. There is a small difference here. Gold ETFs are treated as non-equity assets and hence their definition of short term will be 3 years instead of 1 year. Also, LTCG will continue to be taxed at 20% after considering the benefit of indexation based on the period of holding and the applicable cost inflation index (CII).

What about securities transaction tax which is applicable on all stock market transactions? Do I need to pay STT on buying and selling of Gold ETFs too? The good news is that Gold ETFs are not required to pay Securities Transaction Tax (STT). That is because STT is only imposed by default on equity and equity products. Since gold ETFs are explicitly classified as non-equity products, they do not attract STT. That actually improves the redemption yield on gold ETFs.