Real estate, gold and fixed deposits have traditionally been the most preferred investments of Indians. In the recent past, gold has provided attractive returns due to which long term return from the yellow metal also looks attractive. However, returns from real estate have been in negative territory in the last few years. In such a situation financial planners advise restructuring your portfolio by reducing exposure to real estate and increasing exposure to gold to up to 15%. Analysts say due to the uncertainty over economic growth due to Covid pandemic, gold may see further upside in the near future.
If you decide to reduce your exposure to real estate and gold, you need to be aware of the capital gains tax rule on these two assets. Here is how short-term and long-term capital gains from gold and real estate are taxed.
Physical Gold
If you sell your physical gold after three years of its purchase, then the gains arising out of that sale will be considered as long-term capital gains and it will be taxed at 20.8% after indexation, a process in which your purchase price is adjusted to reflect the impact of inflation.
If you sell your gold before three years of purchase then the gain will be considered as short term and it will be added to your income for that financial year and will be taxed at slab rates.
Sovereign gold bonds
These bonds score over physical gold and other assets on taxation front as they do not attract capital gains tax if held until maturity. If sold before maturity, then short term capital gains will be taxed as per slab rates and long term capital gains are taxed at 20.8% after indexation. If gold bonds are listed then long term will be considered as one year. Interest earned on sovereign gold bonds every year is taxed as per your slab rates.
Real estate
In case of real estate, property sold after two years of purchase is considered as long term and before two years of purchase is considered as short term. Short term capital gain from real estate is taxed at slab rates while long term capital gain is taxed at 20.8% after indexation.
(Source: Times Now News)
