India's recurring gold crises are fundamentally a policy failure rather than consumer obsession, according to recent analysis. The country sits on an estimated 25,000 tonnes of privately held gold, much of it idle in lockers. To address this, experts propose making demat holding charges on digital gold and sovereign gold instruments effectively zero, similar to how UPI made digital payments frictionless. The government must also revive and redesign the sovereign gold bond ecosystem with a fresh programme offering even a token 1% annual return to attract investors away from physical bullion. Taxation policy requires strategic reset, with capital gains tax on digital gold transactions abolished or significantly reduced compared to physical gold, and GST on digital gold instruments brought to zero temporarily for a limited period. Recent market developments show PNG Jewellers offering zero deduction and flat ₹999/gm making charges on old gold, indicating potential industry-wide adoption of cost-effective gold exchange models.
According to reports from NDTV Profit, gold is taxed differently based on its form and holding period. Gold sold within 24 months is taxed as short-term capital gains at the investor's slab rate, applying to physical, digital and paper investments. Gold held over 24 months is taxed at 12.5%, down from the previous 20%, with no indexation benefits. The taxation rules remain largely similar for both Indian residents and NRIs, with the key difference being NRIs cannot invest in Sovereign Gold Bonds. Another overlooked issue is the high conversion cost between jewellery and monetised gold, with melting losses and processing charges discouraging participation. Lowering these frictional costs through policy incentives or standardisation can significantly improve adoption.
As reported by NDTV Profit, NRIs can invest in physical, digital and paper gold in India under RBI and Foreign Exchange Management Act (FEMA) norms. Short-term capital gains apply if sold within 24 months, taxed at the investor's income tax slab rate. Long-term capital gains apply for holdings over 24 months, with the same 12.5% tax rate as for Indian residents. Investors can reinvest long-term capital gains from gold into residential houses to claim exemption under Sections 54F and 54EC. However, recent guidance emphasizes that documentation matters more for coins and bars treated as investments versus jewellery viewed as cultural/family holdings. Families often avoid remaking old jewellery because the process can trigger additional tax liabilities and valuation disputes, with removing capital gains implications on remaking or recycling of old jewellery encouraged to bring dormant gold back into circulation.
According to NDTV Profit, gold received as a gift or inheritance from family members is exempt from tax. Wedding gifts are also tax-free under Section 56(2) of the Income Tax Act. However, gold worth over ₹50,000 received from non-relatives on any occasion other than a wedding is taxable and must be declared under 'Income from other sources' in the investor's ITR. Recent guidance clarifies that during tax searches, authorities generally do not seize 500 grams for married women, 250 grams for unmarried women, and 100 grams for men, though these are seizure relief guidelines, not ownership limits. Regulators should closely examine non-individual entities holding gold purely as investment assets, as institutional accumulation through ETFs adds pressure to imports and foreign exchange demand.
India should consider a one-time Gold Amnesty and Monetisation Scheme to address dormant gold holdings, according to recent analysis. The scheme would allow holders to retain the right to mortgage or liquidate holdings, with no appreciation or interest accruing during the lock-in period. At maturity, holders would receive either the original value or prevailing value, whichever is lower. A similar framework could apply to silver. This approach would encourage households to bring dormant gold back into circulation rather than purchasing newly imported gold, while reducing pressure on imports and foreign exchange demand. The future lies in making digital gold cheaper, simpler and more trustworthy than physical gold itself, as India cannot tax its way out of gold dependence and must innovate its way out of the recurring crisis.
