The Union Budget 2021 has brought good news for gold investors and traders with the announcement of a new framework for the regulation of gold exchange. The Securities and Exchange Board of India (SEBI) has been designated as the regulator of the gold exchange, and it has come out with a comprehensive regulatory framework for spot trading in gold through Electronic Gold Receipts (EGRs).
In an effort to promote the concept of Electronic Gold, the budget 2023 proposes to exclude the conversion of physical gold into EGRs and vice versa by a SEBI-registered Vault Manager from the purview of "transfer" for the purposes of capital gains. This means that the conversion of physical gold into EGRs and vice versa will not be considered a transfer and will not attract capital gains tax.
The budget also proposes that the cost of acquiring EGRs for the purpose of computing capital gains should be deemed to be the cost of gold in the hands of the person in whose name the EGRs are issued. The holding period for the purpose of capital gains would include the period for which the gold was held by the assessee prior to its conversion into EGRs and vice versa.
In order to implement these changes, several amendments are proposed to be made to the Income Tax Act. The amendments include adding a new clause to section 47 of the Act, a new sub-section to section 49 of the Act, and a new clause in the Explanation 1 of sub-section (42A) of section 2 of the Act. These amendments will take effect from April 1, 2024, and will apply to the assessment year 2024-25 and subsequent years.
In conclusion, the new proposals for gold exchange in the Union Budget 2023 are a significant step towards promoting electronic gold and making gold trading more convenient and tax-efficient for investors and traders. The amendments proposed to the Income Tax Act will provide a more stable and clear framework for the regulation of gold exchange and will be of great benefit to the gold industry.