When talking about precious metals, undoubtedly, gold is the most prominent amongst them. However, silver is not too far behind. Primarily, due to its lower cost and higher demand, silver is an investment. It is quickly gaining traction amongst investors across India, whether investing in physical or some form of digital silver like silver coins, bullion or both.

Before you jump into this shiny investment opportunity, you should understand the tax implications of buying and selling silver in the country. In this article, we'll break down the tax implications for buying and selling silver in India.

Why Silver is Becoming a Popular Investment Option?

People are beginning to see silver as a smart alternative to gold. It costs less, is more available, and is very important in both industrial and green technologies. You can choose to buy silver coins, or you can look to buy silver bars online. Not to mention now, investing in digital silver, which has opened the doors for even first-time investors to invest small amounts. But, as with any investment, the tax is never too far behind.

GST on Buying Silver in India

If you're planning to buy silver bars online or from a jeweller, remember that you'll be paying Goods and Services Tax (GST) on the purchase. Here's how it works:

• You pay GST rate on silver, which is 3%

• This tax is applicable whether you're buying silver coins or bars, jewellery, or even raw silver.

So, if you purchase ₹1,00,000 worth of silver, you'll be paying ₹3,000 as GST. Note: If you are a registered business buying silver for resale or production, you can claim Input Tax Credit (ITC) under GST. But for regular individuals, it's an additional cost.

Capital Gains Tax on Selling Silver

This is the part many investors overlook. When you sell silver, any profit you make is taxable under capital gains tax, just like it is for gold or property.

Let's break it down:

1. Short-Term Capital Gains (STCG)

• If you sell silver within 3 years (36 months) of purchase, it counts as a short-term capital asset.

• The profit you earn is added to your total income and taxed as per your income tax slab.

For example:

If you bought silver for ₹50,000 and sold it after 2 years for ₹70,000, the ₹20,000 profit is taxed based on your income slab.

2. Long-Term Capital Gains (LTCG)

• If you sell silver after 3 years, it becomes a long-term asset.

• LTCG is taxed at 20% with indexation benefit.

Indexation adjusts your purchase price based on inflation, which reduces your taxable gains. This is beneficial if you're holding silver bars or digital silver for the long term.

How to Calculate Capital Gains on Silver?

Here's a simple way to look at it:

Capital Gain = Selling Price – Indexed Purchase Price (for LTCG)

OR

Capital Gain = Selling Price – Actual Purchase Price (for STCG)

Keep records of purchase invoices, dates, and any other related charges. These details help calculate accurate gains and ensure smooth tax filing.

Income from Digital Silver

With many platforms offering the chance to invest in digital silver, more Indians are entering the silver market. But how is this taxed?

• Digital silver is treated just like physical silver.

• GST is applicable on purchase.

• Any gain from sale is taxed as capital gain, depending on the holding period.

So, if you sell your digital silver within 3 years, STCG rules apply; after 3 years, LTCG rules with indexation come into play.

TDS on Large Transactions

If you're selling silver worth over ₹50 lakhs in a financial year, Tax Deducted at Source (TDS) may be applicable under certain circumstances. While this typically applies more to real estate, it's worth checking with a tax expert if you're dealing with high-value silver coins or bars.

Reporting Silver Gains in ITR

Yes, you need to report gains from selling silver in your Income Tax Return (ITR). Use the capital gains section to declare short-term and long-term profits. Even if you didn't make a profit, but sold silver, it's good practice to report the transaction. It shows transparency and helps avoid scrutiny.

Quick Tips for Silver Investors

• Keep receipts and invoices: These are vital for calculating capital gains and availing indexation.

• Understand your holding period: It changes the way your profits are taxed.

• Don't forget GST: It adds to your cost, especially when buying in bulk.

• File your ITR properly: Report your gains to stay tax-compliant.

Whether you're collecting silver coins or bars, planning to buy silver bars online, or trying your hand at investing in digital silver, knowing your tax duties is half the investment journey. Taxes on silver aren't complicated, but they do exist and understanding them can save you from surprises later.

Silver is more than just a pretty metal. It's a valuable investment, but like all good things, it comes with responsibilities. Stay informed, file your taxes properly, and let your investment in silver shine without any shadows.