Bought and sold gold or silver ETFs on same day amid sharp price swings? Know the tax impact
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Intraday transaction
Heightened volatility in precious metals over the past year has prompted investors to undertake intraday, short-term, and long-term transactions in these schemes. Here is how the capital gain or loss tax structures in precious metal funds will be, as reported by ETBureau.
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Taxation for precious metals ETFs
Investors holding gold or silver ETFs for more than one year pay 12.5% long-term capital gains (LTCG) tax; those holding for less than one year pay 20% short-term capital gains (STCG) tax.
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Taxation for precious metals funds
For gold or silver funds of funds, the holding period for 12.5% LTCG is two years or more; if sold before two years, gains are taxed as per the investor’s income-tax slab.
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How to set off losses
If an investor sells gold or silver ETFs or a fund of funds within one year and incurs a short-term capital loss (STCL), the loss can be set off against short-term or long-term gains from stocks, other ETFs, or equity-oriented mutual funds.
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Are gold and silver ETFs eligible for capital gain exemption?
No. Long-term capital gains tax benefits of up to Rs 1.25 lakh per annum are available only for equity-related instruments. Gold and silver funds are not eligible for this exemption.
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Taxation for bought and sold ETFs amid sharp price swings
Profits from intraday trading of gold or silver ETFs are treated as speculative business income. These are added to your total annual income and taxed as per your applicable income-tax slab rates. Losses from such intraday transactions can be set off only against speculative business profits.
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A scenario of profit and loss
For example, if you lost Rs 10,000 in a gold or silver ETF intraday but made Rs 15,000 profit in a stock or ETF intraday, you will pay tax only on the net Rs 5,000. However, if ETF trades were delivery-based, that would not be speculative income—it would be capital gains and cannot be set off against speculative losses.