NRIs Tax Implications on Gold Investments

Gold has been one of the best options for investments for centuries. Many individuals also invest in gold, which provides them a high returns even in times of crisis or economic downfall of a country. as like other investment assets, like currency, gold maintains its value in times of inflation. 

NRIs also invest in gold, which is also a safe and secure investment for them, but they also need to pay tax in India on the purchase and sale of gold. 

Tax Implications on NRI Gold Investments

The gold which you have invested is taxed according to its type and nature, like physical gold, digital gold, gold mutual funds, etc. If you have any such gold assets, then you are liable to pay the capital gains tax in India or short-term capital gains tax as an NRI for the time that you are holding the gold.

Taxation Rules for the NRIs' Gold Investments

Tax on Physical Gold: As an NRI, if you purchase gold in India, like in the form of any ornaments, jewellery, gold coins, or biscuits, then you need to pay the long-term capital gains tax on the physical gold which are holding for more then 24 months at the 12.5% tax rate, and if you have hold physcial gold for less then 12 months, then you need to pay the short term capital gains tax according to the Indian income tax slab rate. 

Tax on E-gold or Digital Gold: If you have held the digital gold for more than 24 months in India, then you have to pay the long-term capital gains (LTCG) tax, which is taxed at 12.5% and if the short-term capital gains (STCG) tax will be charged according to the applicable tax slab rates. However, the digital gold is not governed by the Reserve Bank of India (RBI) or the SEBI. 

Tax on the Gold received as a Gift or Inheritance: If you receive gold from any other individual who is not your relative and the amount is more than INR 50,000, then you need to pay the tax under the income from other sources. However, according to section 56(2) of the Income Tax Act, if you get any gold gift from children, spouse, or parents, then it will not be taxable under the Indian Income Tax Department. 

Tax on the Paper Gold: NRIs who have invested in the gold ETFs are not liable to pay the TDS. However, you need to pay the TDS if the gold is redeemed directly from the fund house. The taxation of the paper gold is the same as the physical gold. If the paper gold is held for more than 24 months, then you will be taxed at 12.5% on the LTCG, and you can also get up to 1.25 lakhs tax exemption on the long-term capital gains, and the STCG will be taxed according to the tax slab rates.

Here is a table given for the tax implications of gold investment for NRIs

Additional surcharges and health, and education cess apply on the above rates. 

Different Methods an NRI can Invest in Gold? 

Gold is one of the best and most secure investments for NRIs, as it protects individuals from inflation and any economic crisis in the country. An Overseas Citizen of India (OCI), a person of Indian origin (PIOs), Non-resident Indians (NRIs), or an Indian resident can easily invest in gold in India, but they are subject to Indian taxation. 

1. Gold Exchange-traded Funds (Gold ETFs)

You can invest in the gold ETFs in a dematerialized format. One unit of the gold ETF is backed by one gram of physical gold, with 99.5% purity. The price of the gold ETFs is the same as the price of the physical gold. You can choose the Gold ETF from the listed National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE) of any company through your demat or a trading account. 

You can use an NRE account or an NRO bank account for the investment in gold ETFs by using the Non-PINS account. 

2. Gold Mutual Funds 

A Gold Mutual fund allows you to invest in gold in various forms, like the Gold ETFs, physical gold, or any related assets. You can invest in gold directly from the distributors, such as forms, brokerages, or banks. 

For investing in gold mutual funds, you will need a demat or trading account to hold your mutual funds in a digital form. With the help of an NRE or NRO account, you can deposit funds into your demat or trading account with the help of a Non-PINS account only. 

3. Physical Gold

India is the country where you will find most of the physical gold jewelry and ornaments in the homes of residents. According to the recent data, India has around 25,000 tonnes of physical gold held by the residents, which is about 6 times greater than the gold that is stored in Fort Knox.

You can buy physical gold in India, but it has some drawbacks, including the need to pay extra costs for the making and melting charges for gold ornaments and jewelry. 

4. Gold Coins 

You can also buy gold coins, which start from 2.5g to 50 grams, along with the 24-karat purity certification. You can purchase these coins from the jewellers and also sell them back to the jewellers once you get the high returns. 

5. Digital Gold

You can invest in gold by purchasing digital gold, which provides you a 24-karat gold. For the investment in digital gold or e-gold, you need to have a demat account or a trading account with a legal and registered broker.

For digital gold trading, you can use the National Spot Exchange Limited (NSEL), which is a verified and official platform for investing in gold online. Additionally, you can also get your digital gold converted to real physical gold. 

6. Sovereign Gold Bonds

If you have purchased sovereign gold funds before becoming an NRI, you can invest and hold the SGBs until maturity. These SGBs can only be bought by a registered SEBI-authorized agent or broker. If you redeem this bond, you will get it in your bank account, and on the government bonds, you can get up to 2.5% annual interest. However, if you are an NRI, you are not allowed to invest in the Sovereign gold bonds. 

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Benefits of an NRI Investing in Gold

• Investing in gold helps you to avoid any economic crisis in the country and helps you during times of inflation. 
• It helps to promote the Indian traditional values and cultures. 
• It helps to protect NRIs from market volatility. 
• Helps to maintain the balance between the country's economic uncertainty. 
• Gold is globally accepted and valid in all regions of the world.
• Helps you to make your wealth strong and is an easy gift option to relatives and friends.

Income Tax Rules for Gold Investment for NRIs

• According to the Income Tax Act, an NRI can be allowed to invest in physical gold, paper gold or e-gold or digital gold in India. 
• NRIs are not allowed to invest in the Sovereign Gold Bonds according to the RBI and the Foreign Exchange Management Act (FEMA) guidelines. 
• NRIs get the same gold prices as Indian residents. 
• If an NRI has redeemed any gold mutual funds or gold ETFs (in case of short-term capital gains), then they have to pay the required TDS on the redemption. 
• If NRIs have held the gold ETFs for less than 36 months, then they will be taxed according to the Tax slab rates, and if they are held for more than 36 months, then the long-term capital gains will be taxed at a 20% rate. However, this rule is only valid until March 2023. 
• According to the new Finance Act of 2023, gains from gold ETFs are taxed as short-term capital gains, which start from April 1, 2023. 

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Guidelines of RBI and FEMA for NRI Gold Investments in India

• A Non-Resident Indian need a valid NRO or NRE bank account to purchase gold in India, for investment purposes. 
• Make sure you have purchased gold from the authorized dealer or bank, which should be pure and certified. 
• If you have had SGBs before you were an NRI, then you are allowed to hold your SGBs until maturity. However, you are not allowed to make any new investments. 
• NRIs' gold carrying limit is up to 1 kg of gold coins and bars from foreign countries, which are also subject to the customs tax in India. 
• To purchase the gold, you must use your official banking methods. 
• If an NRI in India, there are no limits on the amount of gold. 

Final Thoughts 

 As an NRI, investing in gold is one of the best ways to safeguard from any economic crisis or inflation in the country, but before all this, you need to understand all the tax implications of investing in gold as an NRI. Managing all the taxation on gold can be a challenging task for you.  For this, you can take help from the Visament. 

Visament will help you to understand all the tax implications of purchasing gold from various options like physical gold, gold ETFs, gold mutual funds, or gold coins. We have years of experience agents who will help you in tax planning so that you can determine your taxability easily. For more information, you can contact our Visament website, where you get 24/7 support services to solve all your queries and doubts.