GST, Capital Gains, and Wealth Tax on Gold and Jewellery in India

Owning gold in India has a tax dimension that most buyers either ignore or misunderstand until it becomes a problem.

The tax framework touches you at three points: when you buy (GST), when you sell (capital gains tax), and — in rare but serious circumstances — when your holdings are scrutinised by tax authorities.

Understanding each layer protects you from surprises and allows you to make financially smarter decisions.

GST at the Point of Purchase

The Goods and Services Tax on gold jewellery is levied at 3% on the total assessable value of the jewellery, which includes both the gold value and the making charges.

This structure was confirmed in the GST Council's framework and has remained at 3% since the introduction of GST in July 2017.

However, there is an important nuance on how making charges are billed.

If the jeweller bills making charges separately — as a distinct line item for a service rather than bundling them into the overall jewellery price — those making charges attract GST at 5% as a manufacturing/service charge.

In practice, most jewellers bundle making charges into the jewellery price and charge a flat 3% on the total, as this is simpler.

But if you receive a bill where making charges are a separate line with 5% GST, that is compliant under GST rules.

For diamonds: polished diamonds and diamond jewellery are taxed at 3% GST. Rough, uncut diamonds are taxed at 0.25% (a concessional rate designed to encourage the Indian diamond polishing industry).

Lab-grown diamonds are taxed at 5% GST for the rough stone and 3% for polished stones used in jewellery.

For platinum: the GST rate is also 3%, consistent with gold jewellery.

For silver: 3% GST applies to silver jewellery.

Capital Gains Tax on Sale of Gold

When you sell gold or gold jewellery at a price higher than what you paid, the profit is a capital gain and is taxable.

The tax treatment depends entirely on how long you held the asset.

Short-Term Capital Gain (STCG): If you sell gold held for less than 36 months (3 years) from the date of purchase, the gain is classified as short-term.

It is added to your total taxable income and taxed at your applicable income tax slab rate — 5%, 20%, or 30% depending on your income bracket.

There is no special rate for short-term gold gains; they are treated exactly like salary or business income.

Long-Term Capital Gain (LTCG): If you sell gold held for 36 months or more from purchase, the gain is long-term and taxed at a flat 20% with indexation benefit.

Indexation adjusts your original purchase price upward using the Cost Inflation Index (CII) published by the Central Board of Direct Taxes (CBDT) each year.

This is enormously beneficial for jewellery held for a decade or more, as inflation may have doubled or tripled the indexed cost, dramatically reducing the taxable gain or even eliminating it entirely on older pieces.

Capital Gains Tax Scenarios

Indexed costs are illustrative using approximate CII values. Consult a tax advisor for your specific situation.

Wealth Tax: Abolished

Wealth tax on gold and jewellery holdings was abolished in India with effect from 1 April 2016.

Prior to this, individuals holding gold, jewellery, and other specified assets above a threshold were required to pay an annual 1% wealth tax. This no longer applies.

You may hold any amount of gold jewellery without an annual tax liability on that holding.

This is a commonly misunderstood point — many older buyers continue to believe an annual holding tax exists. It does not.

Income Tax Scrutiny and Unexplained Gold Holdings

While there is no holding tax, tax authorities can question the source of funds used to purchase significant gold holdings.

If your gold purchases are not explained by your declared income, they can be treated as unexplained income and taxed at 60% plus a 25% surcharge under Section 115BBE of the Income Tax Act — an effective rate of 75%.

Gold received as a genuine gift from family is not taxable for the recipient if the total value of gifts received in a financial year does not exceed ₹50,000.

Gifts from specified relatives (parents, siblings, spouse, etc.) are entirely exempt regardless of value.

At a wedding, gifts from relatives are fully exempt with no upper limit under the specific wedding-gift exemption.

CBDT Guidelines on Jewellery During Income Tax Raids

The Central Board of Direct Taxes (CBDT) has issued instructions to tax officers on what quantity of jewellery should not be seized during search operations, without requiring the owner to explain the source of funds.

These limits are: a married woman may hold up to 500 grams of gold jewellery; an unmarried woman may hold up to 250 grams; and a male member of the household may hold up to 100 grams, without needing to provide documentary proof of source.

These are administrative guidelines, not legal exemptions — jewellery above these limits is not automatically seized, but the assessing officer may ask for documentation.