Taxation rules for Silver ETFs in India: What investors need to know

Ramesh always believed in the shine of silver. It wasn’t just about jewellery at Diwali; it was also about smart investing. He watched the price of silver tick upward on his trading app, and when a new product appeared on his screen — units of the Silver ETF listed on the stock exchange — the lure was clear: own the metal, skip the locker, buy and sell like a stock.

But then a question popped up: “What happens when I sell? What tax do I pay?” That is when he realised that the gleam of silver hides complexity in how India taxes these funds. For an investor like Ramesh—and for you—the rules matter just as much as the price.

CA Niyati Shah, Vertical Head – Personal Tax at 1 Finance, says that silver is steadily shedding its ornamental image to emerge as an investment-class metal. For those opting for Silver Exchange Traded Funds (ETFs) - which mirror silver prices without the headache of storage - understanding the new tax regime is key to protecting returns.”

The Union Budget 2024 brought uniformity to the taxation of precious-metal funds. Silver ETFs redeemed on or after 23 July 2024 are now subject to a simplified taxation framework. If held for more than 12 months, profits qualify as long-term capital gains (LTCG) and attract a flat 12.5 % tax (plus surcharge and cess). There is no indexation benefit.

If sold within 12 months, the gain is treated as short-term capital gains (STCG) and taxed at the investor’s income-tax slab rate.

Illustration: "An investor putting ₹1,00,000 in a Silver ETF and redeeming after 18 months at ₹1,25,000 will pay ₹3,125 as tax (12.5 % of ₹25,000), netting ₹21,875 post-tax: a cleaner, predictable outcome compared with the earlier indexation-linked complexity. By harmonising taxation for gold and silver instruments, the government aims to channel savings into transparent, paper-based commodities. For investors, the silver lining is clear: the longer you hold, the brighter your post-tax returns shine," said Shah.

Therefore, for savvy investors like you and Ramesh, the takeaway is: Know the rules before you invest. Book a plan where your holding period aligns with favourable tax treatment. Silver ETFs can be a powerful tool—but only if you manage them tax-efficiently.