Will The New Tax Laws On Gold Impact Your Personal Finances?

Posted on: Nov 12, 2024 | 3 mins | Written by: HDFC ERGO Team

Will The New Tax Laws On Gold Impact Your Personal Finances?

Gold has always been considered to have intrinsic value, as well as being a store of value that would help maintain people’s financial stability for a very long time. With gold sectors relating to the most current altering in the tax code, doubts about investments in the metals on individual wallets have been raised.

Gold Tax Laws You Should Be Made Aware Of

The new acts that have been put in place by the government for gold tax are aimed at regulating the market to minimise the importation of gold. Important alterations consist of:

1. Import duty

Due to a decrease in import duty from 15% to 6%, gold is now more affordable.

2. Long-term capital gains (LTCG)

Lacking indexation advantages, gold kept for over 24 months of holding comes with a 12.5 per cent tax. Therefore, on the first of April 2025, a new LTCG rate and holding period come into existence.

3. Increased Income and Capital Gains Tax on Gold Exchange Traded Funds (ETFs) and Sovereign Gold Bonds (SGBs)

More so, investing in gold ETFs and SGBs has been subjected to high income and capital gains tax rates that may reduce the overall returns.

Impact on Personal Finances

For sure people’s perception towards gold as an investment instrument will shift considering the new development on the tax laws. Here's how:

1. Decreased Liquidity

Another factor it could be even harder to liquidate gold assets quickly without facing a steep tax charge due to the increased attention to large gold transactions.

2. Tax Burden on Profits

This will be because the amount of earnings you will have obtained from the sale of gold will attract the capital gains tax.

3. Modifications to Investment Approaches

This is an indication that investors may need to reconsider the strategies that they ordinarily use in investing because of the new taxes that have recently been imposed. The upsurge of the tax measures on SGBs as well as gold ETFs may lead to the reconsideration of such investment products among investors.

Using Insurance to Protect Your Gold

Thus, it is even more important to protect your investment due to the raised monetary risk associated with gold as an asset after the recent tax law changes. Here's where different kinds of insurance become relevant:

1. Jewellery insurance

Jewellery insurance is quite vital if you want to guarantee that your prized possessions do not disappear.

2. House Insurance Policy

Most of the time, gold and jewellery are also included in a full house insurance policy.

3. Homeowners Insurance

Just like home contents insurance, homeowners give insurance on gold jewellery and other personal belongings.

4. Renters insurance

For those who rent their house or apartment, renters insurance can provide coverage for the gold and other items.

Conclusion

The changes in the tax laws on gold may result in added costs and tax implications thus may affect the attractiveness of gold as an investment. Thus, it is necessary to act on protection factors such as Jewellery insurance, House insurance policy, Renters insurance, as well as homeowners insurance. This is the reason it is recommended that anyone who invests in gold correctly plans for it to remain a worthwhile investment.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.

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