Buying or investing in silver: Here's how silver ETFs, FoFs, jewellery and utensils are taxed

Silver investments come in different forms, ranging from exchange-traded funds (ETFs) and fund of funds (FoFs) to physical silver, such as jewellery and household utensils.

While all these options provide exposure to silver in different ways, their tax treatment differs. The applicable tax depends on the type of silver investment and the length of time it is held before being sold.

Capital gains tax depends on the type of silver investment

Among market-linked products, silver ETFs qualify for long-term capital gains (LTCG) treatment after a holding period of more than 12 months. On the other hand, silver FoFs or mutual funds are considered long-term investments only after being held for more than 24 months.

The same 24-month holding period also applies to physical silver, including bullion, coins and jewellery. If these investments are sold before the specified holding period, any gains are treated as short-term and taxed according to the investor's applicable income tax slab. Long-term gains are taxed at 12.5% without indexation.

However, silver utensils are not considered capital assets because they are generally meant for personal or household use. As a result, capital gains tax provisions typically do not apply to their sale.

GST on buying physical silver

Purchasing physical silver, including silver jewellery, bullion, coins, and bars, attracts 3% GST on the value of the silver mentioned in the invoice.

For purchases made within the same state, the tax is split equally between Central GST (CGST) and State GST (SGST). For inter-state transactions, Integrated GST (IGST) is applicable.

For silver jewellery, buyers should note that making charges attract an additional 5% GST, levied separately from the GST on the value of the silver.

Disclaimer: This is only for informational and educational purposes. Please consult a qualified tax expert for the latest tax laws and regulations.