Tax on Silver

1. Wealth Tax:

Silver comes under the definition of wealth and the bullion rates on the date of valuation is used to determine the fair market value of silver. If the value of silver does not exceed Rs.5 lakh, then you must submit a statement in Form No. O-8A. If the value of silver is over Rs.5 lakh, then you will have to submit the registered valuer’s report and Form No O-8. The report won’t be binding and the tax assessing officer can determine the fair market value separately. 1% Wealth tax is payable if the net taxable wealth exceeds Rs.30 lakh for the financial year. Wealth tax return must be files on the same day you are filing your income tax return.

VAT:

1% VAT is charged on the purchase and sale of silver. Government puts restrictions on cash transactions as they are not good for the Economy of India.

1. Capital gains:

Sale of silver will be treated as a capital gain. If you are selling the ornament after having held it for more than 36 months, then it will be treated as a long term capital gain and you can avail the benefit of indexation. The long term capital gain is charged at 15%. If you sell silver that you have held for less than 36 months, then it will be treated as short term capital gain is the short term capital gain is charged at 10%.

Tax free Silver:

Silver that is given as a gift is tax free. But you must keep a record of the gift that you have received to avoid confusion with the Income Tax  Department.

What Are the Different Types of Taxes on Silver? 

The following are the different types of taxes on silver: 

1. Tax on Exchange Traded Funds (ETFs): 

The following are the details regarding tax on ETFs: 

1. In India, silver ETFs was launched in January 2024 
2. Investment to be made by Silver ETFs in silver or silver-linked securities should be 95% of assets as per SEBI (Securities and Exchange Board of India) 
3. Depending on the period of holding, the ETFs will be taxed accordingly 
4. All the gains will be taxed as per normal tax rate and will be considered as STCG (Short Term Capital Gain), as per the recent change in 2023 Budget 
5. Tax on silver ornaments and silverware: 

The following are capital gain taxes applicable on silver ornaments and silverware: 

1. Short-term capital gains tax (STCG): 
2. STCG is payable if sale of silver takes place less than 36 months 
3. STCG is added to person’s income which is taxed as per income tax 
4. Long-term capital gains tax (LTCG): 
5. Profit from sale of silver ornaments or silverware is treated as capital gain 
6. LTCG is taxed at 20.80% if silver is sold after 36 months from purchase 
7. Goods and Services Tax (GST): 

The following are the details regarding tax on GST: 

1. GST is imposed on silver item which is applicable on supply and manufacture of ornaments 
2. GST on silver is 3.00% as per the GST council 
3. Making charge on jewelry is taxed at 5.00% GST 
4. GST is exempted from exporting gold, silver and platinum as per GST council to increase exports from India 
5. GST is not applicable at consumer level 

How to Calculate the Price of Silver for Taxation? 

The following are the important points that should be considered while calculating the price of silver for taxation: 

1. The purchase price of silver ornaments includes the cost of jewelry, making charges and GST, and hallmarking charges (if applicable),  
2. The formula for calculating the price of silver for taxation: 

Price of silver per gram x weight of silver x purity of the silver 

What Are the Different Ways to Invest in Silver?   

The following are the different ways to invest in silver: 

1. Silver coins or bars (bullions): Investors can also invest in silver bars and bullions by purchasing these from banks or authorised sellers. 
2. E-Silver: This form of silver can be traded directly on National Spot Exchange Limited (NSEL) which helps in solving the problem of physical storage, making charges, etc. 
3. Silver jewellery: People can invest in silver jewelry which is one of the preferred investment options depending on quality of silver and one must invest only in sterling silver with at least a 925 hallmark, indicating 92.5% purity. 
4. Silver ETFs: Silver Exchange Traded Funds (ETFs) invest 95% of total assets in physical metal or silver-linked instruments, and their NAVs (Net Asset Value) in asset categories such as stocks, commodities, bonds etc., depending on the current silver price.
   

How Does a Silver ETF Work? 

The following are the details about how a silver ETF functions: 

1. The spot price of silver in open markets are tracked by silver ETF 
2. Silver ETFs are regulated by SEBI (Securities and Exchange Board of India) 
3. Variation in silver price affects the NAV (Net Asset Value) 
4. After purchase, the pure metals are kept in vaults by the fund managers of ETFs 
5. Fund managers need to provide the reports on the authentication of silver held in the vaults to the auditors 
6. After redeeming the investment, investors of silver must pay either LTCG or STCG tax 
7. Silver ETFs sold after 36 months of purchase will be taxed as LTCG and at a rate of 20% 
8. Silver ETF sold within 36 months of purchase will be taxed as STCG as per applicable income tax slab 

Critical Factors Affecting the Price of Silver   

The following are the critical factors that affect the silver price: 

1. The silver act as a hedge against inflation and the price of silver increases with increase in inflation rate 
2. Gold prices are directly proportional to each other 
3. Variation ins demand and supply ratio increases the rate of white metal 
4. The silver rate is inversely proportional to the market interest rate as investment in silver is considered as long-term investment 
5. Change in oil price affects the price of silver, as silver mining involves high energy 
6. Change in the policies of government and Reserve Bank of India (RBI) affect the price of silver as many central banks worldwide engage in transactions of silver bullion 
7. Technology and electronic trends affect the prices of silver as it is used in manufacturing electronic goods, including television screen, printed electronic boards, and PV cells 

Other Vital Points Regarding Price of the Silver 

The following are some more significant points regarding the silver price: 

1. Keep the receipt of silver item purchased as it contains the weight of silver, purity, making charges, and even the hallmarking charges. 
2. The making charges is levied on the silver item either per gram basis or as percentage. 
3. Silver fineness is a vital point that should be considered before purchasing and buyers must only look for 999 silvers. 
4. Silver does not come with hallmarking like gold, but investors can ask for hallmarking at minimal charges from the sellers. 
5. Buyers must also check for gold coating or rhodium on silver while checking the weight and purity, as this is added to prevent black coating due to corrosion. 

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