How is Silver Taxed In India - ETFs, FoFs and physical silver
Get a structured overview of silver taxation in India, covering capital gains, Goods and Services Tax (GST), various investment methods, and the taxation mechanism of Silver Exchange-Traded Funds (ETFs) and Silver ETF Fund of Funds (FoFs).
Tax on Silver in India
The taxation of silver in India is primarily governed by two components: Capital Gains Tax on the sale of silver as a capital asset, and Goods and Services Tax (GST) applicable during purchase and making of silver items.
How are different forms of Silver taxed?
Investors can choose from several methods to invest in silver, each with specific tax treatments:
- Physical Silver (Bullion, Coins, Jewellery):
- Taxed as per the Capital Gains rules detailed above upon sale.
- Subject to GST on purchase and making charges.
- Silver Exchange-Traded Funds (ETFs):
- The taxation of Silver ETF units are similar to the rules for equity-oriented mutual funds.
- Silver ETFs track the domestic price of physical silver.
- Silver Fund of Funds (FoFs):
- These funds invest in silver ETFs. The gains are typically taxed similar to physical silver.
Capital Gains Tax on Sale of Silver
Gains arising from the sale of silver, whether in physical form (bullion, coins, or jewellery) or through financial instruments (ETFs), are classified as either Short-Term Capital Gains (STCG) or Long-Term Capital Gains (LTCG), depending on the holding period.
Goods and Services Tax (GST) on Purchase of Silver in India
GST is levied on the purchase of silver in India. The applicable rates are: Silver purchases in India are subject to a 3% GST, split equally between CGST (1.5%) and SGST (1.5%). Here's how GST applies:
1) GST Rate: 3% of the taxable value, which is mentioned on the invoice.
2) Offline Purchases: When silver is purchased through traditional offline channels both SGST (State GST) and CGST (Central GST) are applied, as the transaction occurs within the same state.
3) Online Purchases: If the silver is bought from an online platform and the supplier is from a different state, IGST (Integrated GST) is applicable instead.
Additional Charges
Customs Duty: Gold imports are subject to a 10% customs duty, which has been in place prior to the implementation of GST.
Making Charges: A 5% GST is levied on the making charges for jewellery. This was introduced recently, whereas earlier, only VAT or service tax was applied.
Impact on Silver Prices
With the introduction of GST, silver and silver jewellery have become marginally more expensive, primarily due to the 5% GST on making charges, in addition to the customs duty and the 3% GST on the value of silver itself.
Frequently Asked Questions (FAQs)
1. Is there any Wealth Tax on silver in India?
No. Wealth Tax was abolished in India in 2015. You do not have to pay an annual tax just for owning silver, regardless of how much you hold. However, if your annual income exceeds ₹50 Lakhs, you must disclose specified assets including silver holdings in Schedule AL of your Income Tax Return (ITR).
2. What happens if I inherit silver from my parents or grandparents
Inheriting silver (jewelry, coins, or bars) through a Will or as a gift from a "specified relative" is completely tax-free at the time of receipt. However, when you eventually sell it, you will be liable for Capital Gains Tax based on the holding period calculated from the date the original owner bought it.
3. How is "Digital Silver" taxed compared to Physical Silver?
Digital Silver is treated exactly like Physical Silver from a taxation point of view. You pay 3% GST at the time of purchase. For capital gains, it is considered "Short-Term" if held for less than 24 months and "Long-Term" (taxed at 12.5%) if held for more than 24 months.
4. Can I save tax on silver profits by reinvesting the money?
Yes, you can save tax on long-term silver profits by reinvesting the entire sale proceeds into a new residential house in India under Section 54F of the Income Tax Act, provided you meet conditions like using all proceeds for the new property, buying/building within specific timelines (1-2 years for purchase, 3 years for construction), and not owning another house (apart from the new one) at the time of sale, with a cap of ₹10 crore on the exemption amount from FY 2024-25.
5. Is there any TDS (Tax Deducted at Source) when I sell Silver ETFs? For resident Indians, there is typically no TDS on the sale of Silver ETF units on the stock exchange. However, capital gains tax will be applicable after you sell the units of the Silver ETF.
Disclaimer - Please note that this article or document has been prepared on the basis of internal data/ publicly available information and other sources believed to be reliable. The information contained in this article or document is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party in any manner. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article or document.
The applicability of tax provisions may vary based on individual facts and circumstances, and tax laws are subject to amendments and periodic changes.
Readers should consult their tax advisor or qualified professional for guidance specific to their situation. Neither the author nor the publisher shall be responsible for any loss or liability arising directly or indirectly from the use of, or reliance on, the information contained herein.
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Published on Jan 23rd, 2026