How to save Capital Gains Tax on Sale of Gold?

Gold is not only used for ornamental purposes in India but continues to be one of the most popular forms of investment options with Indian households. As per the RBI data, savings in the form of gold and silver ornaments has increased drastically from Rs 38,446 crore in 2020-21 to Rs ₹65,104 crore in 2024.

Gold is also seen as an asset for security to be liquidated in times of any emergency or financial trouble, or to fund any other need that may arise through a gold loan.

But at the time of selling the gold, one must keep in mind the tax implications. In particular, sale of gold whether in the form of jewelry, coins or in electronic form, may require the seller to pay the capital gains tax. It is important to know how gold is taxed at the time of selling.

In this post let us understand – What are the applicable capital gain tax rates on sale of Gold? How to avail Long Term Capital Gains Tax Exemption on Sale of Gold in Tax Year 2026-27 (AY 2026-27)?

Tax Treatment of Capital Gains on Sale of Gold

The investments in gold or gold related products are treated as capital asset under the income tax laws so any gains realized over its acquisition cost is taxed under the head “Capital Gains”.

The capital gain tax rates for selling gold assets vary based on the duration of ownership, which determines whether it falls under ‘long-term’ or ‘short-term’ capital gains.

Following the tax overhaul introduced in Budget 2024, the taxation of capital gains on gold in India operates on simplified holding period thresholds and a unified long-term tax rate.

We have now understood that there is a certain rate of tax that we need to pay on capital gains from Sale of Gold. Are there any provisions to avoid this capital gain tax?

Please note that Capital gains tax on short term gains is unavoidable, and no tax exemptions are available to minimize your tax liability. However, you can claim deductions to lower the tax liability on long-term capital gains from sale of gold investments.

Note on SGB Holding Periods & Taxation: SGB gains are 100% tax-free on redemption at 8-year maturity (or RBI’s 5-year premature redemption window) for original subscribers. For early taxable exits, LTCG applies after 12 months if sold on an exchange and after 24 months for off-market transfers. Taxable gains may also be fully sheltered under Section 86 (formerly Section 54F) by investing the net proceeds in a residential house.

How to save Long Term Capital Gains Tax on Sale of Gold?

Below are the ways one can save on long term capital gain tax from Sale of Gold in FY 2026-27;

As long as you hold Gold Mutual Fund units for more than 24 months, the gains qualify as LTCG (taxed at 12.5%) and are fully eligible for reinvestment tax exemptions like Section 54F.

• Under Section 54F, by investing the Long-Term Capital Gains in a residential house.
• Reinvesting the Gains in Capital Gains Saving account.
• You can “set off” long-term capital losses (LTCL) incurred from other investments against your LTCG from gold.

Tax Act Update: Starting FY 2026–27 under the new Income Tax Act 2025, capital gain exemption sections have been renumbered. The long-term capital gain exemption on gold (by investing in a residential house) is now covered under Section 86 (formerly Section 54F).

How to avoid Long-Term Capital Gains Tax u/s 54F (now Section 86) on Sale of Gold?

• You can use the sale proceeds (received by selling gold) to buy a new house or to build a new residential house.
• If you use a part of the money, the deduction will be proportion of the invested amount to the sale price.
• The new house has to be bought one year before (under-construction property) the transfer of the first house or within two years after the sale. (For an Under-construction property or flat, the construction has to be completed within three years of the transfer of the first property.)
• On the date of the gold sale, you must not own more than one residential house (excluding the new one you are investing in).
• The deducted capital gain (from sale of gold) becomes taxable if you buy another house (other than the new one) within two years of the transfer of the original asset or construct a new one within three years.
• If the new house is sold within three years, the deduction claimed will become taxable as a long-term gain.
• This new house purchased or constructed must be situated in India.
• The proceeds should not be invested in a commercial property or in another vacant plot.

“With effect from Assessment Year 2024-25, the Finance Act 2023 has restricted the maximum exemption to be allowed under Section 54F. In case the cost of the new property (capital asset) exceeds Rs. 10 crores, the excess amount shall be ignored for computing the exemption under Section 54. Up to FY 2022-23, there was no tax exemption ceiling limit u/s 54F.“

How Section 54F Exemption is Calculated?

Under Section 54F, the exemption is calculated proportionately based on the total net sale proceeds reinvested. The formula is:

Exemption Amount = (LTCG × Cost of New House (Max ₹10 Crore)) / Net Sale Proceeds

If you reinvest the entire net sale consideration into the new residential house, the full long-term capital gain is exempt from tax. If you reinvest only a portion of the net proceeds, you receive a proportionate tax exemption. For the purpose of this calculation, the maximum eligible cost of the new house is capped at ₹10 Crore.

Capital Gains Account Scheme (Section 88)

If you are unable to invest the sale proceeds in any of the above options before the date of income tax returns filing, you can deposit the Long-Term CAPITAL GAINS (not entire sale proceeds) amount in a public sector bank or other banks as per the Capital Gains Account Scheme- CGAS, 1988.

With effective from 1st April , 2023 (i.e. A.Y. 2024-25), Capital gain of upto to Rs. 10 Crore can be deposited in CGAS.

• CGAS is only a stop-gap arrangement, until the funds are used to purchase or construct a new residential property.
• The deposited money can be used only to buy or construct a residential house within the prescribed time frame.
• If you withdraw funds from this account, they have to be used within 60 days.
• If you do not utilize the amount within three years of the sale of the first property, such un-utilized amount will be treated as LTCG this will lead to taxation of the unutilized amount as long-term capital gain after three years of the sale of the first / original property.
• The interest rates paid on these accounts are the same as those on regular savings and term deposits. Kindly note that interest earned on this account is taxable.

Tax-Loss Harvesting

Long-Term Capital Loss (LTCL) from any eligible capital asset (like stocks, equity mutual funds, real estate, or debt funds) can be adjusted directly against your Long-Term Capital Gains (LTCG) from the sale of gold.

By offsetting your gold LTCG with existing long-term losses, you reduce your net taxable long-term capital gains pool, directly lowering your overall LTCG tax liability (taxed at 12.5%) for the financial year.

If your LTCL in a financial year exceeds your total LTCG, the unadjusted balance loss can be carried forward for up to 8 consecutive Assessment Years to offset future long-term capital gains. To carry forward unadjusted capital losses to future years, you must file your Income Tax Return (ITR) on or before the due date

Important Note: Selling old gold to buy new gold doesn’t erase your tax bill. Income tax rules don’t offer a ‘gold-for-gold’ tax exemption. Capital gains tax (STCG at slab rates or 12.5% LTCG) applies the moment you sell, and the proceeds can only be shielded from tax if reinvested in a residential house under Section 86.

To put in a nut-shell;

• If you have LTCG on sale of Gold, to save tax,
  • You can invest the gains in another Residential property (or)
  • Temporarily invest in Capital Gains Account Schemes.
  • Set off” long-term capital losses (LTCL) incurred from other investments against your LTCG from gold.

Continue reading related articles:

• Income Tax Deductions FY 2026-27: Complete Guide to Old vs New Tax Regime
• Best Gold Investment Options in India | A comparison

(Post first published on : 03-Oct-2023) (Post Last Updated on : 14-Aug-2026)