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Real estate and gold are two of the major areas where Indians invest. These form a large segment of the portfolio if Indians. However, you must have noticed, that the returns from these two avenues have been poor in the last couple of years. Investing in these asset classes does not bring you much profit, apart from keeping them for self-use. It is important to know the amount of tax you need to pay on each of these two asset classes. Here, you can check out the taxes applicable to real estate and goals, and the gains that you make on a short and long-term basis from these investments.
Gold is a long-term investment and you need to invest for at least three years. A long-term capital gain tax of 20.08 % is applicable on gold. You can also invest in sovereign gold bonds. The short-term capital gain tax applicable in this case is also 20.08%. When you invest in real estate, the same rate is applicable for a long-term capital gain tax.
Therefore, you must decide whether to invest in gold or real estate.
Comparing the size of the two investments, it appears that the investment in real estate is huge. As a resource, land is limited and the prices are exponentially increasing. It is necessary to have a large sum to invest in real estate as down payment and often, the process involves debt financing. On the other hand, the size of investment in gold depends completely on the appetite of the investor. One can buy as low as one gram of gold. However, the process involves additional making charges, which adds to a large amount of money.
Considering the earning potential, it is advisable to invest in real estate, rather than gold. The prices of land have been consistently rising over the years. Besides, it can prove immensely beneficial to generate a recurring income for the investors. You can use a rental property to generate money to pay off a mortgage. Besides, you can generate cash income, which ensures that the liquidity is high. On the other hand, gold is not as liquid as real estate. If the market prices go down, the money is likely to get blocked for a long period of time. Besides, the returns vary according to the market conditions.
In terms of volatility, real estate is less volatile, as compared to gold. Gold prices vary on a daily basis and the risk in investment is high. On the other hand, real estate is comparatively safer, and records reveal that the prices of real estate have been increasing consistently over the last few years. Considering these aspects, it is recommended to go for a real estate investment, rather than purchasing gold.
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