The rule that changed in 2025-26
For a couple of years gold funds were treated harshly. Gold ETFs and gold mutual funds bought from April 2023 were swept into a rule that taxed their gains at your full slab rate, with no long-term concession, alongside debt funds. That was reversed. From the 2025-26 financial year, gold ETFs and gold funds were taken back out of that rule and returned to the capital-gains regime, so a long-term gain on them is taxed at the lower 12.5% rate again.
The holding period that makes a gain long-term differs by form. A listed gold ETF is treated like a listed security, so it is long-term after more than 12 months. A gold mutual fund, which is a fund that invests in gold ETFs, is long-term after more than 24 months. Digital gold, bought and sold through an app, is treated like physical gold, long-term after more than 24 months, cut down from the old 36-month period. Below those thresholds, the gain is short-term and taxed at your slab rate. The long-term rate is 12.5% without indexation, charged under Section 112, not the equity long-term section, because gold carries no securities transaction tax.
Where TDS applies, and where it does not
For an NRI the withholding differs across the three, which trips people up. When you redeem a gold mutual fund with the fund house, the fund house deducts TDS under Section 195 on your gain before paying you, at the long-term or short-term rate, which you then reconcile on your return, or reduce with a lower-deduction certificate.
But when you sell a gold ETF on the stock exchange through a broker, there is no TDS, because it is a market trade between investors with no single payer to withhold, just like selling listed shares. And digital gold sold on an app carries no TDS mechanism either, so you report and pay on those gains yourself. A practical point on digital gold: many of the apps that offer it restrict NRI onboarding on their compliance rules, so it is often not open to you in the first place. A practising CA computes the gain on the right holding period and rate for each form, reconciles the fund-house TDS, and reports the untaxed ETF and digital-gold gains correctly.