Impact Of Custom Duty Cuts & Tax Changes: Understanding The Drop In Gold Prices And What It Means For You

Finance Minister Nirmala Sitharaman on July 23 presented the Union Budget 2024 in the parliament after which the gold prices have seen a significant decline, leaving many puzzled.

Gold, which is considered as one of the most sought after commodity in the world is believed a safe-haven asset by many in our country.

However, there are several factors that have contributed to this recent drop in the gold price.

Here is the breakdown of recent decline in the prices of gold:

1. One of the major game changer to the recent decline in gold prices is the reduction in custom duty. This is one of the significant changes impacting gold prices.

In the latest development, the government reduced the customs duty on gold imports from 15 per cent to 6 per cent.

As the country imports most of its gold, this reduction has significantly lowered raw gold prices.

2. On the other hand, the global market has also played a major role in the gold price decline. This means, there has been a decrease in demand for gold, while the supply has surged.

This has also lead to a drop in the gold rates. With more gold available and fewer buyers in the market, the rates of the yellow metal have dropped, affecting the international gold market.

3. Finance Minister Nirmala Sitharaman presented the Union Budget 2024 in the Lok Sabha on July 23 and announced key changes to the tax rate on gold profits, reducing it from 20 per cent to 12.5 per cent.

Earlier, when selling gold, inflation was considered in the calculation, which decreased the taxable profit.

Without this adjustment, individuals might end up paying more tax on their gold, which has also impacted demand.

Gold Prices - Numbers Speak

After the Budget 2024, these changes were quickly had an impact in the market. Before the budget announcement on July 22, the rate of 24-carat gold was Rs 73,218 per 10 grams.

But by August 1, the price had dropped significantly to Rs 69,309 per 10 grams, a decrease of Rs 3,909 per 10 grams.

On August 2, the 10 grams 22 carat gold rate stood at Rs 64,800 and 24 carat at Rs 70,690.