Silver Taxation Rules in India 2025: How Physical Silver, Silver ETFs & Mutual Funds Are Taxed

Silver Taxation Rules in India: How Your Earnings from Physical Silver, Silver ETFs and Mutual Funds Are Taxed

Investing in silver can be a smart move to diversify your portfolio. But when it comes to taxation, things can get complex — especially because the rules differ depending on how you invest: physical silver, silver exchange-traded funds (ETFs), or mutual funds (including funds of funds) that invest in silver.

In this comprehensive guide, we’ll walk you through the tax implications in India for each of these investment forms — in clear, human-friendly language.

Whether you’re newly considering silver or already invested, understanding these rules will help you plan better, avoid surprises, and file your taxes correctly.

1. Understanding the different forms of silver investments

Before diving into tax rules, it’s crucial to understand the types of silver investments most common in India, because the tax treatment differs between them.

Physical silver

This refers to tangible holdings of silver: bars, coins, or jewellery made of silver. Buying a silver bar or coin, or holding silver jewellery primarily for investment (rather than ornament) falls into this category.

For physical silver:

• You bear storage or safekeeping risk.

• You incur GST on purchase (more on this in a later section).

• On sale, your holding period and acquisition date matter for tax.

Silver ETFs

A silver ETF is a fund listed on a stock exchange whose units you can buy and sell like shares, and which tracks the price of (pure) silver. For example, fund houses in India launched silver-ETFs that invest in physical silver or silver-related instruments, and their Net Asset Value (NAV) rises (or falls) with the silver price. 

Key points:

• You need a Demat + trading account to invest. 

• Since it tracks silver, you get “commodity-exposure” without physically storing silver.

• Tax rules for these are different from purely equity investments.

Silver mutual funds / Fund of Funds (FoFs) investing in silver

Some mutual funds may invest in silver ETFs or silver commodities, effectively making them “silver mutual funds” or “funds of funds (FoFs)” that allocate into silver ETFs. Their taxation depends on how they’re classified (equity vs non-equity) and on the holding period. 

In short:

• If you hold physical silver → tax follows one set of rules.

• If you hold silver ETFs or mutual funds tied to silver → tax follows another.

• Also important: when you purchased and how long you held it matter a lot.

2. Income tax basics you need to know

To make sense of the rules ahead, here are some standard income-tax terms used in India:

• Short-Term Capital Gains (STCG): Gains from transfer of a capital asset held for a relatively short period. The exact “short term” threshold depends on the type of asset.

• Long-Term Capital Gains (LTCG): Gains from transfer of a capital asset held for more than the “short term” threshold.

• Indexation benefit: For certain assets, you can adjust the “cost of acquisition” for inflation (using the Cost Inflation Index, CII) when calculating LTCG, which reduces taxable gain.

• Tax slab rate: For STCG in many cases the gain is added to your taxable income and taxed as per your income tax slab (e.g., 0%, 5%, 10%, 15%, 30% etc, depending on your income).

• Flat tax rate: For some assets, LTCG or STCG may be taxed at a flat rate (say 12.5%) instead of slab rate.

• Holding period: How long you have held the asset before selling. The threshold holds significance for qualifying as STCG vs LTCG.

Keep these in mind as we explore how they apply to silver investments.

3. Taxation of Physical Silver

Let’s first tackle physical silver — bars, coins, jewellery (held primarily for investment) — because this is the form many retail investors are familiar with.

Holding period thresholds

According to recent clarifications (for example the article in The Economic Times), for physical silver:

• If you sell within 24 months (i.e., held for less than or equal to 24 months) → the gain is treated as Short-Term Capital Gain (STCG).

• If you sell after more than 24 months, then it is treated as Long-Term Capital Gain (LTCG). 

Note: Previously, for some precious metals the threshold was 36 months; but the new rules (from the 2024 Budget) have shortened the holding period for certain cases. 

Tax rate on sale of physical silver

Once you determine STCG vs LTCG, what tax rate applies?

• STCG (held ≤24 months) → The gain is added to your total taxable income and taxed at your applicable income tax slab rate (your earning bracket). 

• LTCG (held >24 months) → The tax rate depends on when you purchased the silver:
• If purchased on or after 23 July 2024, LTCG is taxed at 12.5% flat, without indexation benefit.

• If purchased before 23 July 2024, older rules may apply: LTCG taxed at 20% with indexation benefit.

Example

Suppose you bought a silver bar on 1 January 2023 for ₹1,00,000, and you sell it on 1 February 2025 for ₹1,50,000. Holding period: more than 24 months → qualifies for LTCG. If purchase before 23 July 2024, so 20% with indexation applies. After applying indexation you compute the gain, then tax at 20%.

If instead you purchased on 1 August 2024 for ₹1,00,000 and sold on 1 October 2026 for ₹1,50,000, then since purchased after 23 July 2024, LTCG taxed at 12.5% flat, no indexation.

GST and other taxes when buying physical silver

• When you buy silver bars or coins — Goods & Services Tax (GST) applies. For silver (in unwrought form) the GST is 3 %. For silver jewellery, the metal portion may be 3 % and making charges are subject to 5 % GST. 

• If you buy jewellery, you must consider that part of cost is “jewellery making charges”, which also attract GST (making charges are at 5 %). 

Important things to note

• The actual date of acquisition matters a lot — if you bought before the new rule date, older taxation rules apply.

• Physical silver being an asset means you may also consider costs of storage, security, and risk of theft or damage — not tax, but relevant for net return.

• Losses from sale of silver (if sold at a loss) may have rules for carrying forward losses (check latest laws) — but losses and their offsetting differ by asset class.

4. Taxation of Silver ETFs

Next let’s focus on silver ETFs — funds you buy via stock exchanges that track silver’s price.

Classification and holding period

Silver ETFs are generally treated as non-equity oriented funds / debt-type assets for tax purposes (even though underlying is a commodity) under the present regime. That means their capital gains are taxed like debt/fixed-income assets rather than equity assets. 

In particular, for silver ETFs:

• If you hold units for less than 12 months → STCG (Short Term) (in many interpretations). Some sources used 24/36 months earlier, but recent clarifications put 12 months for ETF units purchased on or after a date. Rupeezy+1

• If you hold units for more than the threshold (12 months/24 months) → LTCG (Long Term) qualifies. For newer purchases the threshold is 12 months. Bajaj FinServ Markets+1

Tax rate on Silver ETFs

For LTCG and STCG in silver ETFs:

• STCG (held less than threshold): The gain is added to your total taxable income and taxed as per your slab rate. Paisa Forever

• LTCG (held beyond threshold): For units acquired on or after 1 April 2023 or after the date specified, the LTCG rate is 12.5% flat, without indexation benefit. Rupeezy+1

Example

You buy a silver ETF on 1 June 2024 for ₹50,000 and sell it on 1 August 2025 for ₹70,000 (holding >12 months). Your gain = ₹20,000. Since units purchased after April 2023, LTCG taxed at 12.5% → tax = ₹2,500.

If instead you sold on 1 March 2025 (i.e., before 12 months) your gain = ₹20,000, but it will be added to your income and taxed as per your slab (say you’re in 30% bracket → tax ~₹6,000 plus cess etc).

Notes & caveats

• The 12.5% LTCG rate applies only for units acquired after certain dates (see Fund’s scheme information) and after the budget change. For older units (acquisition before 1 April 2023), older regime may apply. Rupeezy

• The 1 lakh plus exemption on LTCG (applicable to equity funds/ETFs) does not apply to silver ETFs, since they are non-equity. (The exemption of ₹1.25 lakh LTCG is only for equity assets). > “The ₹1.25 Lakh LTCG Exemption: It Doesn’t Work Where You Think It Does.” Reddit

• Since silver is a commodity and the ETF is classified as “other than equity”, indexation benefit may not apply.

• Brokerage, Demat charges etc are overheads but don’t change taxation of gains.

5. Taxation of Silver Mutual Funds / Fund of Funds (FoFs)

When you invest in a mutual fund (or FoF) that invests in silver (or silver ETFs), tax treatment depends on how that scheme is classified and your holding period.

Classification: equity or non-equity

Mutual funds in India are taxed differently depending on whether they are “equity-oriented” (at least 65 % invested in Indian equities) or “non-equity funds” (less than 65% in Indian equities). Reddit+1

Silver mutual funds / FoFs (which invest in commodities/ETFs) are typically non-equity funds (because they invest in silver rather than Indian equities). That means they follow the tax rules for non-equity funds.

Holding period & tax rate

For such non-equity mutual funds (silver FoFs or similar):

• STCG (held up to threshold) → taxed as per income tax slab rate.

• LTCG → taxed at 12.5% flat (for units acquired after the relevant date) without indexation, depending on holding period threshold (e.g., usually > 24 months for FoFs) Rupeezy+1

Example

You invest in a Silver FoF on 1 January 2024 for ₹1,00,000. You sell it on 1 February 2026 for ₹1,30,000 (held >24 months). If the fund is non-equity and under the newer regime, LTCG = ₹30,000 taxed at 12.5% = ₹3,750.

If you sold earlier (within threshold), say on 1 December 2024, then the gain would be taxed as per your slab.

What about mutual funds that invest partly in silver and partly elsewhere?

If a mutual fund scheme invests a portion in silver but also a significant portion in equities, then classification matters. If the equity exposure is ≥65%, it may be treated as “equity-oriented” and taxed accordingly. 

If less, it will be non-equity. The scheme’s documentation (Scheme Information Document / SID) will identify classification. Axis Mutual Fund

Key points

• The benefit of indexation typically does not apply for silver mutual funds under new regime.

• The exemption of ₹1.25 lakh LTCG (applicable to equity funds) does not apply.

• As always, check the exact acquisition date to determine whether older rules apply.

6. Other relevant tax considerations for silver investments

Beyond just capital gains tax, there are other tax/transactional rules you should keep in mind when investing in silver.

GST on purchase of silver and silver jewellery

• As mentioned earlier, buying physical silver (bars/coins) attracts 3% GST on the value of metal. Jewellery has more complexity: the metal portion gets 3% GST, making charges get 5%. 

• Digital silver (fractional buying via platforms) also attracts GST (and sometimes storage fees) though currently the GST is aligned with physical silver. Upstox - Online Stock and Share Trading

TDS (Tax Deducted at Source)

• Generally, selling physical silver, silver ETFs or mutual funds does not attract TDS at source. 

• However, if you are a non-resident (NRI) or make large transactions crossing certain thresholds, TDS provisions may apply (for example under Section 195 for payments to non-residents, or Section 194Q for high value purchase by a buyer). 

Reporting in Income Tax Return (ITR)

• Gains from sale of silver or silver-ETFs or mutual funds must be reported in your ITR under “Capital Gains”.

• You should report the acquisition date, sale date, cost of acquisition, sale price, and type (short-term or long-term capital asset) to compute taxable gain.

• Use correct ITR form: typically ITR-2 if you have capital gains but no business income; ITR-3 if you have other income including business. 

Carry-forward of losses

If you incur a capital loss (sale price < cost) on silver investments, you may be able to carry forward the loss (subject to conditions) to set off against future capital gains of the same category. Check latest rules for such carry-forward period (typically 8 years for capital assets).

Acquisition cost & indexation

• For older purchases (before rule change), the cost of acquisition could be indexed (for inflation) for computing LTCG.

• But for schemes acquired on/after specified dates (e.g., silver ETFs purchased after April 2023/23 July 2024), indexation benefit may not apply. HDFC MF Files Bucket+1

Why the rules changed & what to watch

The Union Budget of July 2024 clarified the taxation of gold & silver (and related ETFs/FoFs) to simplify and standardize treatment. For example, the rules shortened holding periods, reduced LTCG tax rate for newer acquisitions, clarified non-equity classification. HDFC MF Files Bucket+1

For investors, key to watch:

• The date of acquisition of the asset.

• Whether the investment is equity-oriented or non-equity.

• Holding period.

• Whether indexation benefit applies.

• Whether the ₹1.25 lakh LTCG exemption applies (in most silver cases, no).

7. Summary Table: Taxation in Different Silver Investment Forms

Investment Form	Holding Period for LTCG	STCG Rate	LTCG Rate	Indexation Benefit	₹1.25 lakh LTCG Exemption Applies?
Physical silver (bars/coins)	> 24 months (post rule change)	Income tax slab rate	12.5% flat (for purchases on/after 23 Jul 2024)	No (for newer purchases)	No
Physical silver (earlier purchases)	> 24 months	Income tax slab rate	20% with indexation (for purchases before 23 Jul 2024)	Yes	No
Silver ETFs (units acquired post budget)	> 12 months	Income tax slab rate	12.5% flat	No	No
Silver ETFs (units acquired before specified date)	Varies (older regime)	Income tax slab rate	20% with indexation	Possibly yes	No
Silver Mutual Funds / FoFs (non-equity classification)	> 24 months (for FoFs)	Income tax slab rate	12.5% flat	No	No

Note: The thresholds above may differ by exact acquisition date and scheme documentation — always check the scheme’s SID and the date of purchase.

8. Practical Tips for Investors

Here are some actionable tips to help you manage your silver investments from a tax perspective:

1. Check the acquisition date: This is critical because the tax rate changes depending on whether you purchased before or after the budget rule change (23 July 2024 or 1 April 2023 etc).

1. Know the holding period threshold: If you plan to hold long term, it may pay off to wait until the LTCG threshold is achieved rather than selling earlier and paying higher slab rate.

1. Be aware of classification: If you invest in a mutual fund/FoF that mixes silver with equities, check whether the fund is classified as equity-oriented (≥65% equities) or not. That classification impacts tax.

1. Track cost of acquisition carefully, including purchase price, any making charges (for jewellery), storage or platform fees (for digital silver). Higher acquisition cost lowers taxable gain.

1. Keep documentation: Bills/receipts for physical purchases; Demat statements for ETFs; redemption statements for mutual funds; clearly showing date of purchase and sale, cost, units.

1. Plan transactions with tax in mind: If you are close to the threshold date (say 24-month mark), consider selling after completion of threshold rather than before, if your investment plan allows.

1. Consider your income tax slab: If you anticipate a high slab (say 30%), paying slab rate on STCG may hurt — so you might prefer to hold for LTCG if possible.

1. Don’t ignore GST: For physical silver, the cost at purchase already includes GST (3% or 5% depending) which effectively reduces net return. Factor that in.

1. NRI/Foreign investors: If you are a non-resident Indian (NRI), additional rules apply (TDS, tax treaties) so consult a tax advisor. The Economic Times

1. Stay updated: Tax rules can change with future budgets; what applies today may evolve.

9. FAQs on Silver Taxation

Q1: Does the ₹1.25 lakh LTCG exemption (applicable for equity investments) apply to silver ETFs or physical silver?
A: No. That exemption is only for gains from equity shares or equity-oriented mutual funds (where >65% is in equities). Silver investments are treated as non-equity and don’t get that exemption. 

Q2: Can I use indexation benefit for physical silver purchased recently?
A: For physical silver purchased on/after 23 July 2024, LTCG is taxed at 12.5% without indexation benefit. For earlier purchases the older regime (20% with indexation) may apply. 

Q3: If I buy physical silver jewellery, is the jewellery considered “investment” or “ornament”?
A: For tax purposes, if your jewellery purchase is genuinely for investment (and you can sell it later for a gain), capital gains rules apply. If it’s purely for ornament/use, tax treatment may differ. Keep bills/records. Also GST on jewellery includes making charges etc.

Q4: What about digital silver investments?
A: Digital silver (fractional purchases via platforms) is treated similarly to physical silver for GST and capital-gains taxation (as it replicates silver holdings) unless special scheme classification exists. 

Q5: What if I hold silver ETFs but sell after, say, 18 months?
A: If your holding period is less than the LTCG threshold (for example less than 12 months for newer purchases) then your gain will be treated as STCG and taxed as per your income tax slab.

Q6: Are the gains from silver ETFs added to “income from other sources” or “capital gains”?
A: They are capital gains (either short-term or long-term) because you are transferring (selling) a capital asset. They are not treated as “income from other sources”.

Q7: If I purchase a silver ETF via a SIP (Systematic Investment Plan) over time, how is cost considered?
A: Each tranche of your investment has its own acquisition date and cost. When you redeem, typically the units redeemed first will be those acquired earliest (FIFO basis) for tax calculation. Keep records of each lot.

10. Final Thoughts

Silver can be an appealing investment — especially for diversification, hedge against inflation or as part of a broader commodities portfolio. But taxation matters — because what you take home (after tax) is what really counts.

In India today:

• If you hold silver short term, you may end up paying your full slab tax rate on the gain.

• If you hold beyond the threshold, newer rules make LTCG tax lighter (12.5%) for many cases, which is good — but you still need to check your purchase date, scheme classification and documentation.

• Physical silver has additional costs (GST, storage) and slightly different holding period rules compared to silver ETFs and mutual funds.

• Silver ETFs and funds will never get the same tax benefits as equity investment (e.g., the ₹1.25 lakh LTCG exemption) unless they somehow qualify as equity-oriented (which most silver funds do not).

• Good practice: keep accurate records, know your holding period, classify correctly, and file your ITR appropriately.

  Silver Taxation Rules in India