You may see gold as a safe and secured investment option. But in the eyes of taxation authorities, it is seen as a collectible. Hence, before investing in gold investments, you must be familiar with the capital gains tax associated with it.
Since last few years, many people have started taking interest in gold as an investment option. After observing the recent fluctuations in gold prices, many of us have been thinking of investing in physical gold or even gold ETFs. Right? So, let us understand the necessary tax implications before hurrying to get gold and trading in the market.
Gold is not so glittering in case of tax implications
Understand the simple logic of tax implication. You have bought gold in physical form. After a while, you sell it and gain profit. Now, you think that all this profit is yours. But that is not the case in practice. You have to pay charges at a certain rate towards tax implications on your gains. Don’t stick only to the physical gold. Following is the list of gold investment options on which you are required to pay tax:
- Physical gold – This is in the form of gold bars, coins, and so on.
- Certificate gold – This is also known as paper money. It is treated as a collectible. You own gold in the form of certificate and hence, you have to bear the tax.
- Electronic Gold – This is also treated as a collectible.
- Gold ETFs – It is a financial product. You can trade in the gold market and earn profits according to the changes in gold prices. Unfortunately, you have to bear capital gains tax on it.
There is no need to be scared of these tax implications. The necessity is to be aware about these rules and regulations. Being knowledgeable makes you win half the battle.
It is to be noted that gold stocks are taxed at regular rates of capital gains.
To report or not to report
If you are selling your gold investments, you are required to report the gains produced out of it. It may happen that the concerned dealer is not reporting their purchases to the authorities. But you need to play a safe and clean game! You must always report your gains out of gold sale. When profit is earned, it must be reported and a certain tax rate must be paid.
Keep in mind that if you are selling your gold jewelry, you are not required to report its details. Here, some of the gold investors follow a trick. They diversify their gold investments in jewelry items and do not worry about tax consequences. But they do have to worry about thefts.
An investor must keep himself updated with the tax implications and its changes with regard to gold investments. You may also seek advice of a tax advisor in such cases for improving tax efficiency. They will help you in taking gold investment decisions.
