Budget 2026: Expert suggests reducing holding period for gold funds and physical gold to 1 year
As gold prices continue to hover near record highs and uncertainty clouds global markets, Indian investors are once again turning to gold as a haven.
Although there is still a high demand for gold investments, many retail investors believe that the income tax rules around gold funds are unfair and unclear,
and they want Finance Minister Nirmala Sitharaman to address this in Budget 2026.
One of the biggest concerns is the uneven treatment of different gold investment options under capital gains tax laws. Currently, gold ETFs become long-term
after just one year, while physical gold and gold mutual funds are only considered long-term assets if they are held for more than two years.
Retail investors using SIPs are most affected. In order to put gold funds and physical gold on level with gold exchange-traded funds (ETFs), investor organisations and market participants are now pushing the government to shorten the holding time for both to one year.
"There is a disparity between the holding period to qualify as a long-term asset for capital gains tax for gold funds and physical gold (2 years) versus Gold ETFs (1 year). Retail investors who are investing in gold funds via SIP, for example, even for 8 years and sell it, have to pay tax as per slab rates on the SIPs that have been invested in the previous 2 years. So, holding period for gold funds and physical gold should be reduced to 1 year to qualify as a long-term asset," said Ronak Morjaria, Partner at ValueCurve Financial Services.
Another major demand ahead of the Budget is the revival of Sovereign Gold Bonds (SGBs). The government has not announced any new SGB tranches recently, disappointing investors who saw the product as one of the most tax-efficient ways to invest in gold.
"Also, the government should consider restarting SGBs, as that was one of the best ways to earn tax-free returns on Gold," added Ronak Morjaria.
In addition to providing investors with exposure to gold prices, SGBs offered 2.5% annual interest and totally tax-free capital gains upon maturity.
Gold investors are hopeful that the finance minister will address these long-standing issues in the Union Budget 2026, making gold taxes fairer, simpler, and in line with how investors really make investments.
Source: https://upstox.com/