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I have never invested in paper gold, though I own gold jewellery.
I have never invested in paper gold, though I own gold jewellery.

Best option to invest in gold from income tax point

Gold is considered to be a hedge against inflation and is inversely correlated to equities.

Which is the best option to invest in gold? Is gold still a good buy? I have never invested in paper gold, though I own gold jewellery. Which is the best option to invest in gold from taxation point of view?

--Rajni Srivastava

By Prashant Maurya, Partner, Citrine Financial Advisors

Gold is considered to be a hedge against inflation and is inversely correlated to equities. When there is high volatility in the financial markets, gold provides stability to the portfolio. You can invest in gold with long investment horizon and should not expect it to mirror the returns that it had delivered in the last one year or so again too soon unless some economic unrest happens again.

Gold investments through financial route is always better than physical holdings unless you want to use it as an ornament. Holding in financial form e.g. ETF or a fund of fund route of mutual fund is good for the following reasons

  • Liquidity :You can sell your gold mutual funds at anytime subject to exit load, if any.
  • Transparency: NAV of gold funds is declared on a daily basis and for an ETF, on stock exchanges regularly
  • Taxation : If you sell or redeem gold funds after three years of holding, then you get indexation benefit similar to a debt fund which keeps you tax liability low
  • No storage troubles: No need of a locker to hold financial gold.

Some of these benefits may not be available to you when you keep gold in physical form. Hence, not only from taxation point of view, but due to other benefits, as cited above, investing in non-physical gold is a better option.

(Views as expressed by the expert.)

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