Last Updated:
In Union Budget 2024, Nirmala Sitharaman, the finance minister of India, announced that the long-term capital gains (LTCG) on gold ETFs would be taxed at a flat 12.5 per cent rate without indexation if held for just 12 months. Earlier, LTCG on gold ETFs were…Read More
Gold ETFs aim to track the domestic physical gold price. They are passive investment instruments.
Gold has become a favored investment for investors due to global uncertainties caused by the Middle East crisis, Donald Trump’s tariff threats, and a slowdown in the global economy.
Indians have a strong inclination to collect jewelry due to its deep-rooted societal value. Gold is said to be considered as a safe asset and hedge against inflation risks. Modern times, however, are bringing changes in the approach with people shifting from yellow tinted ornaments to financial gold.
India’s gold jewellery demand has constantly been falling in recent years. According to data of World Gold Council, the country’s gold jewellery demand dropped to 563 tonnes (expected) in 2024 from 600 tonnes in 2022, reflecting a decline of 7 per cent. Moreover, it stood at 610 tonnes in 2021 and 575 tonnes in 2023.
Why Is The Demand For Gold Jewellery Declining?
Gold price in India is constantly rising, making it costlier to purchase jewellery. Moreover, there’s additional making charges on jewellery around 10-12 per cent which can’t be obtained in selling these jeweler.
Young investors aren’t lured with the jewellery as an investment asset anymore. They are more interested in the digital form of gold assets known as financial gold.
Financial Funds are investment instruments associated with Gold in the form of mutual funds or exchange-traded funds (ETFs).
Massive Jump In Gold ETFs
Gold ETFs are becoming a popular investment avenue for investors in India. According to data of Association of Mutual Fund in India, the net inflow into gold ETFs witnessed a massive jump of 216 per cent to Rs 9,225 crore in 2024, outshining the previous year’ inflow to Rs 2919 crore in 2023.
Gold ETFs aim to track the domestic physical gold price. They are passive investment instruments.
They can be bought and sold via stock exchange like equities. Moreover, investors don’t need to pay any making charges on them. The entire sum of investment will be used as an investment without cutting out any cut.
LTCG on Gold ETFs is less than physical gold
In Union Budget 2024, Nirmala Sitharaman, the finance minister of India, announced that the long-term capital gains (LTCG) on gold ETFs would be taxed at a flat 12.5 per cent rate without indexation if held for just 12 months. Earlier, LTCG on gold ETFs were taxed at 20 per cent with indexation if held for over three years.
Physical gold such as jewellery, bars and coins, on the other hand, are required to hold for a 24-month holding period to qualify for LTCG benefits.
