Budget 2026: FM Nirmala Sitharaman Announces Cut in Customs Duty on Gold and Silver to 5%

• Import duty on gold and silver reduced to 5% in Union Budget 2026.

• ₹3,500–4,200 per 10g immediate drop in domestic gold prices

• 25%+ festive demand surge projected for the jewellery sector.

The recent announcement of a reduction in the import duty on gold and silver has sent ripples through India’s jewellery market. Finance Minister Nirmala Sitharaman’s decision to slash the customs duty on gold and silver to 5% from the previous 6% has sparked discussions about its potential impact on jewellery prices and the broader precious metals market.

The customs duty on gold import and silver import has been a topic of debate for years. The recent reduction in import duty for gold and silver to 5% marks a substantial change in the government’s approach to these precious metals. This decision aims to enhance domestic value addition in gold and precious metal jewellery, potentially reshaping the industry landscape while curbing smuggling—building on Budget 2025’s 6% cut.

The reduction in duty on gold import is expected to have a direct impact on domestic gold prices. With the customs duty on gold decreasing to 5%, domestic 24K gold fell ₹4,000 per 10g to ₹89,300 within 24 hours, while silver dropped ₹4,500 per kg to ₹1,02,000 per kg.

However, global factors continue to play a crucial role in precious metal pricing. Gold holds at $2,650 per ounce amid geopolitical tensions, but India’s import parity pricing now saves consumers ₹2,000–2,500 per 10g on jewellery. A 3–5% further softening is expected through H1 2026 if the rupee stabilises below ₹85 per USD.

One of the primary objectives behind reducing the import duty for gold and silver is to stimulate domestic demand. Lower prices resulting from reduced customs duty on gold and silver could make these precious metals more accessible to a broader segment of the population. This increased affordability may lead to a 25–30% surge in purchases of gold and silver jewellery, coins, and bars during Diwali and Dhanteras 2026.

Also Read: Investing in Gold: 4 Things You Need to Know First

The gems and jewellery industry has long awaited a reduction in the basic customs duty on gold, silver, and platinum. This move is likely to benefit jewellers in several ways:

1. Increased Sales:Competitive Edge
   Lower prices are expected to drive higher sales volumes, particularly during festive and wedding seasons, when gold demand traditionally peaks.
2. Competitive Edge:
   A more favourable duty structure can enhance the international competitiveness of Indian jewellery, supporting export growth.
3. Export Opportunities:
   A more favourable duty structure could enhance the international competitiveness of Indian jewellery.

High import duties often incentivise smuggling as a way to bypass taxes. The reduction in customs duty on gold import from 15% → 6% → 5% is expected to make legal import channels more attractive. This move could potentially reduce gold smuggling activities by 30–40%, benefiting legitimate trade and improving government revenues through higher GST collections.

While the reduction in import duty for gold and silver is expected to boost demand, it also has broader economic implications:

1. Trade Deficit:
   Increased gold imports could widen India’s trade deficit, as gold remains a major component of the country’s import bill.
2. Currency Impact:
   Higher gold imports may exert additional pressure on the Indian rupee in the short term.
3. Industry Growth:
   The gems and jewellery sector, one of India’s largest export contributors, could see accelerated growth due to improved cost competitiveness.

Overall, the reduction in import duty on gold and silver marks a significant shift in India’s precious metals policy. While lower prices and increased demand are expected, the full impact will unfold gradually. Consumers, jewellers, and investors should closely track market trends to make informed decisions.

Also Read: Calculation on Custom Duty on Import