Silver investments are gaining a lot of traction in recent times. With the dual character of a traditional investment tool and a high-utility metal in industries and advanced technology, the price and demand for silver have hit an all-time high. That said, the following blog post comprehensively discusses the tax implications of holding and selling silver.

Understanding Tax on Silver in India

Except when you trade silver as a part of your business activity, silver is treated as a capital asset under section 2(14) of the Income Tax Act. Consequently, the sale of silver is taxed under capital gains. Silver investments in different forms, e.g., silver utensils, jewellery, bullion, silver mutual fund and silver ETF, are taxed differently. 

How Much Silver Can You Keep Without Tax Implications?

• There is no prescribed limit on holding silver. Holding silver, to whatever extent, does not attract any tax implications. Tax incidence occurs only on transfer, attracting capital gains tax. 
• Through a circular, the CBDT has issued recommended limits for holding gold for individuals of different genders and marital statuses. This does not have any holding on silver. 
• Also, the taxpayers can refer to a circular if they are beneficial for them. Otherwise, they can either ignore or challenge them before the appropriate judicial authority.

When to Report Silver in Income Tax Return (ITR)?

Silver sales and holdings have separate disclosure requirements and tax implications. 

Silver Holdings

• When the taxable income has crossed Rs. 1 crore rupees, a detailed disclosure of all the asset holdings, borrowings, and other liabilities needs to be made in the appropriate ITR form.
• Silver holdings need to be reported in Schedule AL of ITR 2 or ITR 3.

Silver Sale

• As a silver sale attracts capital gain tax, the assessee should report the sale price, purchase price, transfer expenses, date of purchase and sale, and capital gains in ITR 2.
• If the assessee has business income too, the appropriate form is ITR 3.

Taxation on Selling Silver

• The sale of silver attracts capital gains, and the taxation rates and holding periods differ for different asset forms.
• The following table prescribes capital gain taxation for silver investments.

*- without indexation

Tips for holding silver at home

• If household silver is preferred, it is recommended to hold it in the form of utensils, rather than bullion and jewellery, as it does not attract capital gains tax.
• If holding silver as a paper investment, silver investments in the form of ETFs are preferred, as the holding period to qualify for long-term capital gains is less than mutual funds (12 months for ETF).

Conclusion

As dynamic as the silver investment market is now, so too are the tax implications on different investment forms in silver. Investors are recommended to analyze their preferred investment type based on different factors like accessibility, safety, and tax implications.