India has significantly increased customs duty on gold and silver imports to 15% from the previous 6% rate, according to reports from Personal Finance News and The Economic Times. The Ministry of Finance introduced the "Customs Baggage (Declaration and Processing) Regulations, 2026" on February 2, 2026, replacing earlier baggage rules. This increase more than doubles the cost of precious metal imports and is intended to reduce non-essential imports while relieving pressure on the nation's growing import bill. The move comes as India seeks to keep its foreign exchange reserves buffer intact amid economic strain caused by the US-Iran conflict. The rupee hit an all-time low Tuesday, falling to as much as 95.75 per dollar during the day before closing at 95.63 - the lowest it has ever ended a session. Since the war in West Asia began, the rupee has slumped by almost 5% against the US dollar and has been Asia's worst performing currency so far in 2026.
The government has expanded the duty increase beyond basic imports to include comprehensive coverage of precious metals. As per Business News and The Economic Times, the customs duty on gold and silver imports has been raised from 5% to 10%, while the Agriculture Infrastructure and Development Cess (AIDC) has been increased from 1% to 5%, taking the total effective import duty to 15%. Additionally, gold and silver findings - small components such as hooks, clasps, clamps, pins, and screws used to hold jewellery in place - now attract 5% customs duty, with platinum findings at 5.4% and platinum itself at 15.4%. A 3% Integrated GST (IGST) will be payable on all imports of precious metals in addition to the basic customs duty and AIDC. This comprehensive approach ensures that all aspects of precious metal imports are subject to the higher duty structure.
The Directorate of Revenue Intelligence (DRI) has repeatedly linked rising import duties with increased smuggling activity, stating that "the increase in the incidence of duty on the imported gold, has incentivised the smuggling of the yellow metal." As per the latest DRI Smuggling in India Report 2024-25, airports accounted for 43.7% of gold smuggling cases in FY25, while more than 55% of smuggling was routed through land borders. The data reveals how rapidly smuggling expanded in recent years, with India recording around two gold smuggling cases per day at airports in FY22, while authorities seized 0.4 kg of gold daily, on average. However, by FY24, the number of daily airport smuggling cases had jumped to 16, while daily gold seizures crossed 10 kg. By FY26 till October, the trend had slowed, with daily seizures falling to nearly 1.2 kg. Smugglers increasingly shifted from airports to land-border routes through Myanmar, Bangladesh and Nepal, with authorities detecting growing use of carrier networks, body concealment and gold paste techniques to avoid detection.
Once passengers exceed the free allowance, the cost impact becomes significant due to the higher import duties, according to Personal Finance News. Any additional jewellery is now subject to the 15% customs duty for gold and silver imports, compared to the earlier 6% regime. The latest increase in import duties has widened grey market operator margins to nearly 18%, compared with around 9% earlier, while the profit margin from smuggling one kilogram of gold has climbed to a record ₹30 lakh. Despite the increased costs, investment demand for gold has exceeded jewellery consumption for the first time in the March quarter as investors turned to the metal amid weak equity returns. Inflows into domestic gold ETFs have continued to rise and are expected to remain robust, with the rally in gold prices already improving profit margins for grey market operators. Prime Minister Narendra Modi's recent appeal asking Indians to avoid buying gold for a year has once again shifted focus to India's heavy dependence on gold imports, with the appeal coming at a time when tensions in the Middle East are pushing up global crude oil prices and increasing pressure on India's import bill.
The government considers precious metal imports as a major contributor to pressure on the current account deficit, with India's gold and silver import expenditure climbing to a record $84 billion in the fiscal year ended March, compared with $35.5 billion a decade ago. As per Business News and The Economic Times, officials stated that the move is a "carefully calibrated and proportionate intervention" to "encourage moderation in non-essential imports at a time when external vulnerabilities remain elevated." The current geopolitical situation has created significant volatility in global crude oil markets and international shipping routes, with India remaining vulnerable to elevated energy prices and supply-side disruptions. Since the onset of the conflict, foreign exchange reserves have been depleted by almost $38 billion, with the fall in reserves to $691 billion also driven by sustained capital outflows from foreign institutional investors amid heightened global uncertainty.
