How Customs Duty on Gold Import Affects Domestic Gold Price and Loan Value

In May 2026, India revised the customs duty gold import structure, increasing the effective import duty from approximately 6 per cent to around 15 per cent. The change affects both the landed cost of imported gold and the domestic pricing benchmarks used by regulated lenders when valuing eligible gold collateral. This article explains the duty structure, the rationale behind the revision, the impact on domestic gold prices, applicable traveller provisions and the possible implications for gold loan valuation.

Gold Import Duty Rates in India: The Full Rate Ladder

Gold import provisions differ according to the category of importer and the applicable customs framework.

Note: All figures are indicative. Actual amounts, fees, coverage percentages, and eligibility criteria may vary depending on the lender, borrower profile, loan category, and applicable guidelines at the time of application.

The May 2026 revision raised Basic Customs Duty from 5 per cent to 10 per cent and the Agriculture Infrastructure and Development Cess from 1 per cent to 5 per cent. CBIC notifications are the authoritative source, and rates can change with fresh notifications, so the current figure is worth confirming there before any import decision.

What Changed in May 2026: Old vs New Duty Structure

The shift is easiest to read side by side. India had cut the duty to 6 per cent in the July 2024 Budget; the 2026 order reversed that cut entirely.

Note: All figures are indicative. Actual amounts, fees, coverage percentages, and eligibility criteria may vary depending on the lender, borrower profile, loan category, and applicable guidelines at the time of application.

Why the Government Raised Gold Import Duty

India's gold demands are largely met by imports, making the nation heavily reliant on global supply and payment in foreign exchange for meeting their demands. As more imports are made, more foreign exchange is required, which might affect the balance of trade as well as the external balance of the country.

In this context, the revision in the duty structure in May 2026 could be seen as a measure taken by the government in order to control the import demands in the country. As the cost of imports is increased, consumption can be reduced, and at the same time, the problem of high trade deficits and high import bills could also be controlled. The duty revision came at a time when the price of gold in the international market was high due to various global concerns.

References to duty rate like 12 per cent or 10.75 per cent could be found in past reports and internet discussions.

Such numbers pertain to the earlier systems of customs duties that prevailed prior to the reduction introduced in 2024 and the further modification made in 2026. Hence, it is sometimes possible that different numbers may cause some ambiguity while comparing old and new provisions.

How Import Duty Raises Domestic Gold Prices

The domestic gold price is influenced by several factors, including the international gold price, exchange rates, import-related duties, taxes and market conditions. When import duty increases, the landed cost of imported gold generally rises. Based on illustrative mid-2026 price levels of approximately ₹14,000 to ₹14,500 per gram for fine gold, a higher duty structure can contribute significantly to the overall landed cost. Actual price movements vary according to prevailing market rates, currency fluctuations and domestic demand-supply conditions.

The pass-through is not always immediate. In the weeks after the May 2026 hike, domestic prices traded at a discount to the full landed cost because demand had weakened sharply while supply remained ample. The gap tends to close over time as inventories built at the old duty run down. So the duty sets the ceiling for domestic pricing, while demand decides how quickly the market reaches it.

What the Duty Hike Means for Gold Loan Applicants

The effect on gold loan valuation typically follows a market-linked process. When higher import duties contribute to an increase in domestic gold prices, the benchmark values used by regulated lenders may also increase over time. Under the RBI's lending framework, valuation is generally linked to recognised market benchmarks, including published rates from authorised sources.

Where benchmark values increase, the same quantity of eligible pledged gold may support a higher assessed collateral value. However, the final eligible loan amount remains subject to applicable loan-to-value (LTV) limits, lender policies, collateral assessment, borrower eligibility and regulatory requirements.

Current RBI directions prescribe tiered LTV limits, including up to 85% for loans up to ₹2.5 lakh, up to 80% above ₹2.5 lakh and up to ₹5 lakh, and up to 75% for loans exceeding ₹5 lakh.

Existing loan amounts are generally not revised automatically during the loan tenure unless permitted under applicable lender processes. Any revised benchmark values are more commonly reflected in new loan sanctioning or renewal assessments.

NRI and Traveller Guide: Bringing Gold to India

Applicable customs provisions vary according to traveller category and eligibility conditions. Under the Baggage Rules, 2026, effective from February 2026, returning residents and tourists of Indian origin who have stayed abroad for more than a year get a duty-free jewellery allowance of up to 20 grams for male passengers and up to 40 grams for female passengers. The limit is now weight-based only, with the earlier value caps removed, and it covers personal-use jewellery, not bars or coins. NRIs and persons of Indian origin who have stayed abroad for six continuous months or more can bring up to 1 kilogram of gold, in bars, coins or jewellery, at the concessional rate of around 15 per cent, with the duty payable in foreign currency. Passengers outside these categories face total levies that can reach around 36 per cent.

Dutiable gold is required to be declared at the Red Channel. Walking through the Green Channel with dutiable gold risks seizure and penalties. A practical document set for the declaration: a valid Indian passport or proof of Indian origin; purchase invoices for the gold; evidence of the six-month stay abroad, such as visa stamps or employment records; and foreign currency for the duty payment.

Conclusion

The revision of the duty schedule in May 2026 will impact the cost of importing gold into India and could also affect domestic price structures going forward. This is because changes in market prices would have an impact on benchmark prices that could be used in gold loans valuation. As the benchmark prices rise, the eligible collateral could enable a higher valuation of the assets, depending on the applicable LTV restrictions, valuation processes and other relevant criteria.

Disclaimer : The information in this blog is for general purposes only and may change without notice. It does not constitute legal, tax, or financial advice. Readers should seek professional guidance and make decisions at their own discretion. IIFL Finance is not liable for any reliance on this content. Read more