December 23, 2011 7:54 pm
What will be tax treatment if one sells a gold ETF
–> with in one year of purchase
–> after 1 year of purchase.
Thanks in advance experts
Dear Rajum, Please ensure that the holding period is actual 1Y say you purchased in July 2010 & sold in august 2011, it’s long term & eligible for indexation but if you purchased in August 2010 & sold in July 2011, it’s short term & gains ‘ll be added to your income from all other sources & ‘ll be taxed @ your marginal rate of tax.
Just google – cost inflation index & you ‘ll get the value of every year starting from 1981-82 as a base of 100.
For your given example –
CII adjusted purchase price = 1500*600/500 = 1800
Sell price = 2500
CII adjusted LTCG = 2500 – 1800 = 700 Rs.
Tax on 700 Rs. @ 20.6% = 144.2 Rs.
Thanks for the help…. How to calculate based on indexation. Does India Govt publish this some where? Also lets say if indexation is like below how to calculate the tax liability?
1. 2009-2010 – Indexation value 500
2. 2010-2011 – indexation value 600
suppose I have 10 units bought at 1500 in 2009-2010 and sold them in 2010-2011 for 2500.
How to calculate? thanks in advance
Dear Rajum, For taxation purpose, the Goold ETFs are classified as debt funds. Accordingly this ‘ll be the situation –
Holding period less than a year – short term gain or loss as the case may be. STCG ‘ll be added to your income from all other sources & ‘ll be taxed at your slab rate. Yes you have the option to set off your STCL to STCG as well as LTCG.
Holding period more than 1Y – Long Term Gain or loss as the case may be. LTCG ‘ll be taxed @ either 10.3% without indexation or 20.6% with indexation. LTCL can be set off against LTCG only.
Gold ETF are treated as debt investment and hence taxed according to the debt structure.But since it is a traded security on stock exchange the long term definition varies in case of ETF then physical gold.
If sold With one year of purchase-Short term capital gains as per your income tax slab
If sold after a year- Long term taxed at 10 per cent without indexation, or at 20 per cent with indexation, whichever is lower.
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