Gold Regulations in India

⚡ Gold Regulation At a Glance

20%

Import Duty on Gold
(15% BCD + 5% AIDC)

3%

GST on Gold
(Jewellery making: 5%)

12.5%

LTCG Tax
(after 24 months, no indexation)

2.5%

SGB Annual Interest
(tax-free at maturity)

₹50K

PAN mandatory threshold
for gold purchase

June 2021

BIS Hallmarking
became mandatory

🏛️ Historical Context

India's gold regulation journey began with the Gold Control Act, 1968 — one of the most restrictive commodity laws in the world. Citizens could not own gold bars or coins above 2 kg; goldsmiths had to be licensed and primary gold dealing was tightly controlled by the government to save foreign exchange.

The Act was repealed in 1990 during India's liberalization, unlocking one of the world's largest gold markets. Today, gold in India is regulated by a multi-agency framework involving the Ministry of Finance, BIS, RBI, SEBI, CBIC, and the Directorate General of Foreign Trade (DGFT).

📅 Key Milestones in Indian Gold Regulation

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1968 — Gold Control Act enacted; strict limits on private gold holdings

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1990 — Gold Control Act repealed; gold trade liberalized

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2000 — BIS introduced voluntary hallmarking for gold jewellery

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2007 — Gold ETFs launched in India (regulated under SEBI MF regulations)

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2015 — Gold Monetization Scheme (GMS) and Sovereign Gold Bond (SGB) scheme launched by RBI

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June 2021 — BIS Hallmarking made mandatory for gold jewellery under Quality Control Order

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2023 — Budget 2023 changed debt MF taxation; gold MFs lost indexation benefit

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2024 — Budget 2024 reduced physical gold LTCG holding period from 36 to 24 months; tax rate set at 12.5% (no indexation)

🏅 BIS Hallmarking — Mandatory Since June 2021

The Bureau of Indian Standards (BIS) Gold Hallmarking is governed by the Hallmarking of Gold Jewellery and Gold Artifacts Order, 2000 as amended by the Quality Control Order, 2021. From 23 June 2021, it became mandatory for jewellers to sell only BIS hallmarked gold jewellery. The rollout was phased — initially 256 districts, extended nationwide from 4 April 2023.

Only three fineness grades are permitted for sale: 14K (585), 18K (750), and 22K (916). Jewellers must be registered with BIS (BIS licence mandatory). Violation attracts heavy penalties including licence cancellation.

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BIS Logo (Triangle)

Bureau of Indian Standards mark — confirms testing

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Purity / Fineness

585 (14K) · 750 (18K) · 916 (22K)

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Jeweller's ID

BIS-assigned 6-character alphanumeric ID of the jeweller

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HUID (6-digit)

Hallmark Unique ID — traceable on BIS Care app

🔍 How to Verify Gold Hallmark

📱 Download the BIS Care App from Play Store / App Store
🔢 Enter the 6-digit HUID printed on the hallmark to verify authenticity
🌐 Alternatively, visit www.bis.gov.in and use the hallmark verification portal
📞 Consumer helpline: 1800-11-4000 (toll-free) for complaints against jewellers
⚠️ Jewellery without HUID since June 2021 is illegal to sell — you can file a complaint

✈️ Gold Import Regulations & Customs Duty

Category	Basic Customs Duty	AIDC	IGST	Total Effective Duty
Gold bars / dore bars	15%	5% (Agriculture Infrastructure and Development Cess)	3%	~24.75%
Gold coins ≤ 10g	15%	5%	3%	~24.75%
Gold jewellery	25%	—	3%	~28%+
NRI: Male passenger	Duty-free up to ₹50,000 worth of gold (1 year abroad)			36% on excess
NRI: Female passenger	Duty-free up to ₹1,00,000 worth of gold (1 year abroad)			36% on excess
Gold (FEMA SEBI route)	Gold ETF / SGB — no customs duty; only domestic taxes apply			N/A

📦 NRI Carrying Gold to India — Key Rules

📅 Must have stayed abroad for at least 6 months continuously to bring duty-free gold
⚖️ Maximum quantity: 1 kg per passenger (bars/coins) on payment of applicable duty
💼 Gold must be carried in personal baggage only — not in cargo or courier
📋 Declare at customs if exceeding duty-free limits — forms available at arrival hall
🚫 Gold smuggling: punishable under Customs Act 1962 — seizure + penalty up to 5× value + imprisonment

🧾 GST on Gold — Rates & Rules

💛 GST Rates on Gold

Raw gold / gold bars / coins 3%
Gold jewellery (supply by jeweller) 3%
Making charges / job work fees 5%
Gold ETFs / Gold Mutual Funds Exempt
Sovereign Gold Bonds (SGBs) Exempt

📋 Important GST Rules for Gold

✅ Input Tax Credit (ITC) on gold purchases — not available (blocked under Section 17(5) of CGST Act)
✅ GST registration mandatory for jewellers with annual turnover >₹40 lakh (₹20 lakh in special category states)
✅ Reverse charge applies when jeweller buys from unregistered supplier — jeweller pays GST
✅ Gold returned by customer within 6 months of purchase — no GST if proper documentation maintained
✅ E-Invoice mandatory for jewellers with turnover >₹5 crore
✅ HSN Code for gold jewellery: 7113, 7114; for gold: 7108

📊 Taxation of Gold — Capital Gains & Income Tax

Gold Investment Type	Holding Period	Tax Type	Tax Rate	Indexation
Physical Gold (jewellery / bars / coins)	< 24 months	STCG	Slab rate	No
Physical Gold	≥ 24 months	LTCG	12.5%	No (post Budget 2024)
Gold ETF	< 24 months	STCG	Slab rate	No
Gold ETF	≥ 24 months	LTCG	12.5%	No
Gold Mutual Funds (FOF)	< 24 months	STCG	Slab rate	No
Gold Mutual Funds (FOF)	≥ 24 months	LTCG	12.5%	No
Sovereign Gold Bond (SGB) — held to maturity	8 years (maturity)	Capital Gain	EXEMPT 🎉	N/A
SGB — sold early on stock exchange	≥ 12 months	LTCG	12.5%	No
Digital Gold (platforms like Google Pay, MMTC-PAMP)	< 24 / ≥ 24 mo	STCG / LTCG	Slab / 12.5%	No

💡 Smart Tax Planning Tips

✅ SGB is the most tax-efficient gold vehicle — hold to maturity for complete CGT exemption on gains
✅ Gold ETF gains can be set off against other capital losses (same category)
✅ Gifted gold takes the original cost of the donor for CGT purposes (cost carryover)
✅ Loss in gold sale (LTCL) can be set off against LTCG from any asset (including property)
✅ Gold held before 1 April 2001 uses FMV as of that date as cost of acquisition

⚠️ Common Tax Mistakes

❌ Treating jewellery gifts from relatives as taxable — gifts from specified relatives are fully exempt under Section 56(2)
❌ Assuming LTCG = 36 months for gold — it is now 24 months (earlier rules changed by Budget 2024)
❌ Not reporting inherited gold — it is not taxable on inheritance, but gains on future sale are taxable
❌ Forgetting SGB interest is taxable at slab rate even though maturity gains are exempt

🎁 Gift Tax Rules on Gold

Under Section 56(2)(x) of the Income Tax Act, gold received as a gift is taxed as "Income from Other Sources" if the aggregate value exceeds ₹50,000 in a year — unless it comes from a specified relative or on certain occasions.

✅ Gifts EXEMPT from Tax

• From spouse
• From parents (biological/step/adoptive)
• From siblings
• From spouse's siblings
• From lineal ascendants/descendants
• On marriage (any amount, any person)
• Under a will / inheritance
• From local authority or registered trust

❌ Gifts TAXABLE

• From friends — fully taxable if >₹50,000
• From employer (as perquisite under salary)
• From business associates
• Anonymous gold worth >₹50,000
• Gold in lieu of services rendered
• Tax: Added to income, taxed at slab rate

🏦 Gold Loan Regulations (RBI)

📋 Key RBI Gold Loan Rules

📌 LTV Ratio: Maximum 75% of gold value — i.e., ₹75 lakh loan on ₹1 crore gold pledged (for NBFCs and banks)
📌 Cash disbursement: Prohibited for loans >₹20,000 — must be via account or digital payment
📌 Minimum purity: Gold pledged must be 18-22 Karat (banks differ; typically 18K min)
📌 Maximum tenure: Usually 12 months (NBFCs); banks may allow up to 3 years for agri gold loans
📌 Bullet repayment: Allowed — pay full principal + interest at maturity
📌 Auction notice: Minimum 30 days prior written notice before gold auction for default

🏢 Regulated Lenders

🏦 Scheduled Commercial Banks — RBI regulated; generally lower interest (8–15% p.a.)
🏢 Gold Loan NBFCs (Muthoot, Manappuram, IIFL) — RBI regulated under NBFC Master Directions; may charge 18–26% p.a.
🌾 Agri Gold Loans (priority sector): Up to ₹3 lakh — concessional interest (7% with subvention)
🏘️ UCBs & Cooperative Banks — RBI supervised; LTV max 75%
⚠️ Unregulated lenders (local moneylenders, pawn shops) — not subject to RBI LTV rules; avoid

💡 RBI's 2024 Circular: RBI issued directions in September 2024 tightening gold loan norms — mandating that NBFCs verify gold ownership, prohibit top-up loans without revaluation, and ensure proper auction process transparency.

🔍 PMLA Compliance for Gold Transactions

The Prevention of Money Laundering Act, 2002 makes jewellers "Reporting Entities." They must follow Know Your Customer (KYC) and report suspicious transactions to the Financial Intelligence Unit (FIU-IND).

Transaction Amount	KYC Requirement	Applicable Law
Up to ₹50,000	No mandatory KYC (but jeweller may ask)	Income Tax Act
₹50,000 – ₹2,00,000	PAN or Form 60 mandatory (cash or otherwise)	Income Tax Rule 114B
Above ₹2,00,000	PAN + Address proof + Photo ID mandatory; transaction in cash prohibited above ₹2L	PMLA + Income Tax
Cash purchase above ₹2,00,000	Illegal — seller liable for 100% penalty on transaction amount (Section 269ST)	Income Tax Act, Sec 269ST
Any amount (suspicious)	Jeweller must file Suspicious Transaction Report (STR) with FIU-IND	PMLA

📛 Gold Jeweller PMLA Obligations

• Jewellers with annual cash turnover >₹2 lakh must register on FIU-IND portal
• Must appoint a Principal Officer for PMLA compliance
• Maintain transaction records for 5 years
• File Cash Transaction Reports (CTR) for cash payments >₹10 lakh in a month
• Non-compliance: penalty of ₹1 lakh to ₹1 crore per default under PMLA

🏦 Sovereign Gold Bonds (SGBs)

⭐ SGB — The Most Tax-Efficient Way to Own Gold

Sovereign Gold Bonds are government securities denominated in grams of gold, issued by the Reserve Bank of India on behalf of the Government of India. They are regulated under the Government Securities Act, 2006.

💰 Interest: 2.5% p.a. on initial investment value — paid semi-annually (taxable at slab rate)
📅 Tenure: 8 years with exit option after 5th year on coupon payment dates
🎯 Min/Max: 1 gram minimum; 4 kg max for individuals; 20 kg for trusts per FY
💸 Issue price: Based on simple average of closing gold price of previous 3 business days (IBJA/MCX)

📈 Listed on BSE/NSE — can be traded before maturity; L-CGT rules apply on exchange gains
🏦 Loan collateral: SGBs accepted as collateral by banks (LTV up to 75%)
🎁 Transferable — can be gifted or transferred; stamp duty applicable
🆓 Capital gains at maturity (8 years): FULLY EXEMPT from tax under Section 47(viic)

📢 Note: The Government discontinued fresh SGB issuances from FY 2024-25. Existing SGBs continue and can be traded on exchanges or held to maturity. Watch for any future RBI announcement on new tranches.

🏅 Gold Monetization Scheme (GMS)

Launched in 2015, the Gold Monetization Scheme lets individuals and institutions deposit idle gold with banks and earn interest. The scheme helps reduce India's gold imports and mobilizes domestic gold.

Short-Term (STBGD)

• 1–3 years tenure
• Interest: ~0.5–1% p.a.
• Maintained by banks as part of CRR/SLR
• Interest: taxable

Medium-Term (MTGD)

• 5–7 years tenure
• Interest: ~2.25% p.a.
• Govt. obligation (not bank)
• Capital gain + interest: EXEMPT

Long-Term (LTGD)

• 12–15 years tenure
• Interest: ~2.5% p.a.
• Govt. obligation
• Capital gain + interest: EXEMPT

Eligibility: Individuals, HUFs, trusts (charitable/religious), mutual funds, ETFs. Minimum deposit: 30 grams. Gold purity tested at government-notified Collection and Purity Testing Centre (CPTC) / BIS certified refinery.

🌍 FEMA Rules for Gold

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Residents: No restriction on holding gold domestically. Can invest in gold ETFs / SGBs / physical gold without any FEMA limit.
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Taking gold abroad: Up to ₹50,000 worth of gold jewellery (male) / ₹1,00,000 (female) can be carried abroad without Custom declaration. Beyond this — export declaration mandatory.
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NRIs / OCIs: Can freely repatriate proceeds from sale of gold bought legally in India — but need to maintain original purchase proof for repatriation documentation via NRE account.
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Gold ETF / SGB (NRI): NRIs can invest in SGBs and Gold ETFs on repatriation basis via NRE account and non-repatriation basis via NRO account. Maturity proceeds follow same NRE/NRO rules.
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Export of gold jewellery: Governed by DGFT. Exporters can claim duty drawback on exported gold jewellery (BIS hallmarked preferred). Manufacturing for export — Advance Authorization scheme available.

📈 Gold ETFs & Mutual Funds — SEBI Regulations

💹 Gold ETF Rules (SEBI)

✅ Regulated under SEBI (Mutual Fund) Regulations, 1996
✅ Must hold physical gold of 99.5% purity at LBMA-approved vault
✅ Expense ratio cap: 1% p.a. (max) for gold ETFs
✅ Tracked to domestic gold spot price (IBJA price used by most AMCs)
✅ 1 unit ≈ 1 gram of gold (approximately; varies by AMC)
✅ Traded live on NSE/BSE like stocks — high liquidity
✅ No making charges, no storage worries, no purity risk

🏦 Gold Fund of Funds (FoF) Rules

✅ FoFs invest in underlying Gold ETFs — no Demat account needed
✅ Higher expense ratio (ETF expenses + FoF expenses)
✅ SIP-friendly — invest as low as ₹100 regularly
✅ Taxation identical to Gold ETF (LTCG at 12.5% after 24 months)
✅ NAV published daily — not real-time like ETF
✅ Examples: Nippon India Gold Savings Fund, HDFC Gold Fund, SBI Gold Fund

🏺 Inherited & Ancestral Gold — Tax Rules

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Inheritance: Receiving gold through a will or intestate succession is not taxable. No gift tax or inheritance tax in India.
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Cost basis for future sale: Inherited gold takes the original cost paid by the previous owner (or FMV as of 1 April 2001 if older). Holding period of original owner also counts for LTCG classification.
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No proof of inheritance: CBDT guidelines provide reasonable allowances for undocumented gold — a married woman may hold 500g, unmarried woman 250g, male 100g without any explanation required during income tax searches.
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Wealth Tax: Abolished since 1 April 2015 — no tax on holding gold, regardless of quantity (beyond CGT on sale).
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Black money risk: Large unexplained gold holdings can invite scrutiny under ITA Section 131 or Benami Property Transactions Act. Keep purchase bills / inheritance documentation safe.