Tax: Silver has returned 64% in a year. Have you earned a lot of money? Learn how income tax will be applied to your earnings..

Silver has filled investors' pockets over the past year. While its price was around ₹97,000 per kg in October 2024, it has risen to ₹1.58 lakh per kg in October 2025, representing an increase of nearly 64%. Furthermore, Silver ETFs (Exchange Traded Funds) have also delivered returns of over 68%.

But where there are returns, there are taxes. If you earn a profit by selling silver, you will be subject to income tax. This tax will depend on the type of investment you made – physical, digital, or ETF.

What is physical silver and where to buy it?

Physical silver means silver that you can hold in your hands – such as jewelry, bars, or coins. This is the oldest and most popular form of investment. It can be purchased from jewelers, banks, or exchanges. Investors typically purchase it for the long term because it doesn't require maintenance or management hassles.

Silver ETFs: A Simple and Digital Way to Invest
Silver ETFs are funds that track the price of 99.9% pure silver. They invest in physical silver or silver-related instruments. The net asset value (NAV) of the ETF fluctuates with the price of silver. The NAV increases when the price rises and decreases when the price falls.

This is an easy and affordable way for small investors to invest in silver. Many fund houses also offer SIPs in silver ETFs, which can be started as low as ₹500.

Digital Silver: A New and Smart Investment Option
In digital silver, you buy units equivalent to physical silver, but don't hold them in physical form. Each unit is backed by physical silver, which is stored in secure vaults. You can buy or sell digital silver through banks, fintech platforms, or investment apps. This is also a small-ticket investment, where you can start with as little as ₹100.

How much tax is levied on the sale of physical silver?
If you sell physical silver, it is taxable under capital gains. If the holding period is less than 24 months, it will fall under short-term capital gains. In this case, your income will be taxed according to your tax slab.

If the holding period is more than 24 months, it will fall under long-term capital gains. In this case, tax will be levied in two ways. If you purchased silver before July 23, 2024, it will be taxed at 20% with indexation. If you purchased it on or after July 23, 2024, it will be taxed at 12.5% without indexation.

Tax Rules for ETFs and Mutual Funds
Silver ETFs and mutual funds are also subject to capital gains tax. If sold within 12 months, it will be considered a short-term gain (STCG) and taxed at the slab rate. If held for more than 12 months, it will be considered a long-term capital gain (LTCG) and taxed at 12.5%. Note that indexation benefits will not be available.

What are the TDS rules for large transactions?
No TDS is generally applicable to the sale of silver, but TDS may apply in certain circumstances. If the payment is made to a non-resident, a tax deduction can be made under Section 195. Under Section 194Q, TDS may apply if the buyer's turnover exceeds ₹10 crore and the purchase value exceeds ₹50 lakh.

Silver is also subject to GST.
GST (Goods and Services Tax) is also applicable to the purchase of silver. Bars, coins, and jewelry are subject to a 3% GST. Jewelry-making charges are subject to a 5% GST. This means that if you purchase silver jewelry, you will have to pay an additional 5% tax on the jewelry-making charges.

Important Points for Tax Planning
If you are holding long-term, the tax rate may decrease.
Digital or ETF investments offer greater liquidity.
Indexation benefits will only apply to older investments.
Be sure to preserve digital receipts and purchase dates for all transactions.

Investing in silver can yield excellent returns, but without tax planning, the real benefits can be lost. Whether physical, digital, or ETF, each form has slightly different tax rules. If you are a long-term investor, you can take advantage of indexation and long-term rates. With proper documentation and tax savvy, you can further enhance your investment.

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.