ETF Taxation in India: Equity, Debt, Gold and Silver ETFs (FY 2025-26)

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Reviewed by CA Jayant Furia

Senior Tax Expert

Last reviewed: 16 October 2026 | Includes relevant Tax Year 2026-27 updates

Not all ETFs in India are taxed the same way. An equity ETF, a debt ETF, and a gold ETF may all trade on the stock exchange, but their tax treatment can be very different. The underlying exposure is what determines the tax outcome, not the fact that the instrument is exchange-listed.

This guide covers how each category of ETF is taxed in FY 2025-26 (AY 2026-27), what changed from earlier years, and key provisions applicable from Tax Year 2026-27 under the Income-tax Act, 2025. The holding period and fund classification must still be checked for the specific investment.

ETF Taxation in India: At a Glance (FY 2025-26)

• ETFs are taxable in India. Both capital gains on sale and IDCW distributions are taxable events.
• Equity-oriented ETFs qualify for equity capital gains treatment (STCG at 20%, LTCG at 12.5% above Rs 1.25 lakh annual exemption) if they meet the domestic equity exposure threshold. STT must be paid on sale.
• Gold and silver ETFs are listed securities. Their LTCG holding period is 12 months. STCG is taxed at slab rate; LTCG at 12.5% without indexation. The Rs 1.25 lakh annual exemption does not apply. STT is NOT applicable on gold and silver ETF transactions.
• Debt ETF taxation depends on structure. From FY 2025-26, Section 50AA's short-term deeming rule applies only to funds investing more than 65% in debt and money market instruments. Gold ETFs and international ETFs are no longer covered by Section 50AA from FY 2025-26.
• GST: Buying or selling ETF units as securities is outside the scope of GST. Separately charged brokerage and other services may attract GST. Physical gold and silver ordinarily attract 3% GST on sale.
• IDCW distributions, where an ETF offers and makes them, are taxed at the investor's applicable slab rate, irrespective of ETF type.
• Exchange listing alone does not determine tax treatment. The ETF's underlying exposure and applicable classification rules govern the outcome.

What Is an ETF and How Does It Work?

An ETF (Exchange Traded Fund) is a market-linked investment that usually tracks an index, a basket of securities, or a commodity like gold. It trades on the stock exchange like a share, with prices fluctuating through the trading day.

Being listed on an exchange does not automatically determine the tax treatment. For holding period purposes, listed ETF units are treated as listed securities, which means a 12-month threshold for long-term status. However, the applicable tax rate depends on what the ETF holds: equity-oriented rules apply to equity ETFs, while non-equity rates apply to gold, silver, and debt ETFs.

How Are ETFs Taxable in India?

ETF investors can face tax in two ways.

• IDCW distributions: If the ETF distributes income under the Income Distribution cum Capital Withdrawal option, that amount is taxable in the investor's hands at the applicable slab rate.
• Capital gains on sale: When ETF units are sold at a profit, tax depends on whether the ETF is equity-oriented or non-equity, the applicable holding period, and any special classification rules that apply to the fund.

Holding Periods by ETF Type (FY 2025-26)

Listed ETF units generally cross the long-term holding-period threshold after more than 12 months. Physical gold and silver and the unlisted fund structures compared below generally require more than 24 months. However, for a debt ETF covered by the specified-mutual-fund provisions, the law deems gains to be short-term regardless of how long the units are held. The holding period by itself does not override that rule.

How Equity ETFs Are Taxed (FY 2025-26)

An equity ETF is generally taxed like other eligible equity assets when it qualifies as an equity-oriented fund under the applicable domestic equity exposure conditions. The fund's legal classification, rather than its marketing category alone, determines eligibility for these rates.

1. STCG on Equity ETFs

Short-term capital gains on eligible equity-oriented ETFs held for 12 months or less are taxed at 20% under Section 111A. Surcharge and 4% health and education cess apply on top.

2. LTCG on Equity ETFs

Long-term capital gains are taxed at 12.5% under Section 112A on gains above the annual Rs 1.25 lakh exemption, where the ETF qualifies for equity-style treatment and STT was paid. The Rs 1.25 lakh exemption is an annual aggregate across all eligible equity LTCG, not a per-ETF or per-holding benefit. If LTCG from multiple equity holdings combined crosses Rs 1.25 lakh in a financial year, the excess is taxed at 12.5%.

Example: Tax on Equity ETF Gains

An investor buys an eligible equity ETF for Rs 8,45,000 and sells it after 13 months for Rs 10,55,000.

Illustrative only. Excludes surcharge and cess. The Rs 1.25 lakh exemption is an annual aggregate. If other equity LTCG was realised in the same year, the exemption available here may be lower or nil.

How Debt ETFs Are Taxed (FY 2025-26)

Debt ETF taxation is not one rule for all products. The revised specified-mutual-fund definition applies to transfers from FY 2025-26; it is important to check both the fund's classification and when its units were acquired.

Section 50AA: What It Does and What Changed

Section 50AA of the Income-tax Act, 1961 deems gains from specified mutual fund units acquired on or after 1 April 2023 to be short-term capital gains, irrespective of holding period. Such gains are generally taxed at the investor's applicable rates. The definition of a specified mutual fund was revised by the Finance (No. 2) Act, 2024. For Tax Year 2026-27, see Section 76 of the Income-tax Act, 2025.

Current Rules for Debt ETFs in FY 2025-26

For specified mutual fund units acquired on or after 1 April 2023, debt ETFs that meet the revised definition (more than 65% invested in debt and money market instruments) are covered by the short-term deeming rule regardless of holding period; the gains are generally taxed at the investor's applicable rate. The 65% threshold is calculated using the annual average of daily closing figures, not a single day's portfolio snapshot. Qualifying debt FoFs have a separate threshold of at least 65% invested in such funds. If the units fall outside this rule, normal listed non-equity capital gains treatment can apply: a holding period exceeding 12 months for LTCG, generally taxed at 12.5% without indexation, and shorter holdings taxed at applicable rates.

Product structure, underlying composition, the date of acquisition and the date of sale all matter. Debt ETF units acquired before 1 April 2023 require a separate check rather than automatic application of the specified-mutual-fund rule. Verify the relevant AMC's tax disclosure and your transaction dates before classifying gains.

Official provisions: Section 50AA (1961 Act) and Section 76 (2025 Act).

How Gold and Silver ETFs Are Taxed (FY 2025-26)

Gold and silver ETFs are not taxed like equity ETFs. They do not qualify as equity-oriented. However, because they are listed on the exchange, they benefit from the 12-month holding period for long-term status, which is shorter than the 24 months required for physical gold/silver or gold/silver mutual fund FoF structures.

• STCG (held 12 months or less): taxed at the investor's applicable slab rate.
• LTCG (held more than 12 months): taxed at 12.5% without indexation.
• The annual Rs 1.25 lakh LTCG exemption available for eligible equity gains does not apply to gold or silver ETFs.
• From FY 2025-26, gold and silver ETFs are no longer covered by Section 50AA. Their gains follow normal listed non-equity securities rules.

STT on Gold and Silver ETFs

STT (Securities Transaction Tax) is NOT applicable on gold ETF or silver ETF transactions. STT applies only to equity-oriented ETFs. The absence of STT on gold/silver ETF trades does not affect their capital gains rates, which are governed by listed securities rules regardless of whether STT is paid.

GST on Gold and Silver ETF Purchases

Purchases and sales of gold ETF or silver ETF units are transactions in securities, which fall outside the scope of GST. This is technically different from a GST exemption. GST may still apply to separately charged brokerage, platform or other taxable services. Physical gold and physical silver generally attract 3% GST on their sale, as does digital gold at purchase. These differences affect the upfront transaction cost, alongside any brokerage, fund expenses, storage or making charges.

Source: CBIC GST Sectoral FAQs (securities and GST).

Physical Silver vs Silver ETF vs Silver FoF vs Digital Silver: Tax Comparison

Silver can be held in several forms in India, and the tax treatment differs meaningfully across them. The table below covers the key differences for FY 2025-26.

Digital silver platforms are not the same as SEBI-regulated silver ETFs; platform terms, ownership and applicable tax treatment should be checked. The table assumes capital-asset treatment for an ordinary investor. For jewellery sold to the customer, GST is generally 3% on the total transaction value including making charges. A separate qualifying job-work service can attract 5% GST on job charges; this is not a general extra 5% tax on jewellery making charges. All capital gains rates shown exclude applicable surcharge and 4% Health and Education Cess. CBIC clarification.

Gold ETF vs Physical Gold vs SGB vs Gold Mutual Fund: Tax Comparison

Gold is available in more investment forms than silver, including Sovereign Gold Bonds (SGBs). The tax treatment differs across each form.

ETF Tax Comparison Table (FY 2025-26)

How ETF Losses Can Be Set Off

ETF capital losses can be set off only against capital gains, not against salary or other income categories.

• Short-term capital loss can be set off against both STCG and LTCG from any capital asset.
• Long-term capital loss can be set off only against LTCG from any capital asset.
• Eligible unabsorbed capital losses can be carried forward for up to 8 assessment years, subject to timely return filing and other applicable conditions.

The set-off rules are based on the nature of the loss (short-term or long-term), not the asset category. A long-term capital loss from a gold or silver ETF sale can therefore be set off against long-term capital gains from equity ETFs or any other capital asset in the same financial year.

Common Mistakes in ETF Taxation

FAQs

1. Are ETFs taxable in India?

Yes. ETF investors face tax on IDCW distributions (at slab rate) and on capital gains when units are sold. The applicable rate depends on the type of ETF and the holding period.

2. Are all ETFs taxed the same way?

No. Equity ETFs, debt ETFs, and gold or silver ETFs have different applicable rates and rules. The underlying composition of the fund and its classification under the Income Tax Act determine the outcome.

3. What is the LTCG tax rate on equity ETFs?

For eligible equity-oriented ETFs, LTCG is taxed at 12.5% under Section 112A on gains above the annual Rs 1.25 lakh exemption. The exemption is an annual aggregate across all eligible equity LTCG, not a per-ETF benefit.

4. What is the STCG rate on equity ETFs?

Short-term capital gains on eligible equity-oriented ETFs (held 12 months or less) are taxed at 20% under Section 111A, plus applicable surcharge and 4% cess.

5. What is the holding period for a gold ETF to qualify for LTCG?

For a listed gold ETF, the holding period for long-term status is more than 12 months, since listed ETF units are listed securities. This is different from physical gold or gold mutual fund FoF structures, which require more than 24 months. Both are taxed at 12.5% LTCG, but the threshold to reach LTCG treatment differs.

6. Is STT applicable on gold ETFs in India?

No. STT (Securities Transaction Tax) does not apply to gold ETFs, silver ETFs, liquid ETFs, or gilt ETFs. STT applies only to equity-oriented ETFs. The absence of STT on gold and silver ETF transactions does not affect their capital gains rates, which are governed by normal listed securities rules regardless.

7. Is GST applicable on the purchase of gold or silver ETF units?

No GST is charged on buying or selling gold ETF or silver ETF units because securities transactions are outside the scope of GST. Separately billed brokerage and other taxable services may attract GST. Physical gold, physical silver and digital gold generally attract 3% GST on sale or purchase, as applicable.

8. How does silver ETF taxation compare with physical silver?

The key difference is the holding period for LTCG. A listed silver ETF qualifies for LTCG after more than 12 months. Physical silver and an unlisted silver FoF generally require more than 24 months, as does digital silver when treated as a capital asset on the stated facts. The LTCG rate is generally 12.5% without indexation for such gains. Physical silver attracts 3% GST on sale, while buying silver ETF units as securities falls outside GST. Transaction-specific classification should be checked with a qualified Chartered Accountant.

9. Do gold ETFs get the Rs 1.25 lakh LTCG exemption?

No. The Rs 1.25 lakh annual LTCG exemption under Section 112A applies only to eligible equity assets (equity shares, equity-oriented mutual funds, and units of business trusts). Gold and silver ETFs are not equity-oriented and do not qualify for this exemption.

10. Are debt ETFs always taxed at slab rate?

No. For eligible specified mutual fund units acquired on or after 1 April 2023, Section 50AA (Section 76 under the Income-tax Act, 2025) treats gains as short-term if the fund invests more than 65% in debt and money market instruments, measured using the annual average of daily closing figures. Debt ETFs outside that classification may follow normal listed non-equity gains rules, including LTCG after more than 12 months at 12.5%. Acquisition date, sale date and fund composition should all be checked.

11. Can ETF capital losses be carried forward?

Yes. Eligible capital losses can be carried forward for up to 8 assessment years, provided the ITR for the loss year was filed on time. Short-term capital loss can offset both STCG and LTCG from any capital asset. Long-term capital loss can only offset LTCG from any capital asset. A gold ETF long-term capital loss can therefore be set off against equity ETF LTCG in the same year. Please consult a qualified Chartered Accountant for transaction-specific guidance.

12. Where should Gold and Silver ETF capital gains be reported in the ITR?

Report gains or losses from selling gold and silver ETF units under Schedule CG (Capital Gains) in the applicable income-tax return, using the entries for the relevant non-equity asset and holding period. Do not automatically report them as equity-oriented gains eligible for the Rs 1.25 lakh exemption. Reconcile broker statements, purchase dates, sale values and the AIS with your records, as pre-filled information may need verification. The appropriate ITR form depends on your other sources of income and individual circumstances.

Disclaimer: This article is for general information and educational purposes only. It does not constitute investment advice, a recommendation, or an offer to buy or sell any ETF or securities. FY 2025-26 (AY 2026-27) references follow the Income-tax Act, 1961 as amended; the explicitly labelled Tax Year 2026-27 updates follow the Income-tax Act, 2025 and applicable amendments, including the revised Sovereign Gold Bond redemption exemption. Actual taxation depends on fund classification, acquisition and transfer dates, investor status and applicable law. Please consult a qualified Chartered Accountant or tax professional for transaction-specific guidance, and a SEBI-registered investment adviser for investment decisions.