Gold’s edge over Nifty 50 narrows after tax, but remains dominant over two decades

A new analysis reveals that despite taxation diminishing their difference, gold continues to outperform the Nifty 50 over twenty years, though at a slightly reduced post-tax annualised return.

Gold has outpaced the Nifty 50 over two decades, but the gap looks smaller once tax is taken into account. A recent comparison, based on FundsIndia data through 31 August 2026, suggests that ₹1 lakh invested in the Nifty 50 index 20 years ago would have grown to about ₹8.98 lakh before tax, while the same amount placed in gold would have become roughly ₹15 lakh.

The difference after tax depends on how each investment is classified. Nifty 50 exchange-traded funds are treated as equity-oriented products, so gains on holdings longer than one year fall under long-term capital gains rules. Under current Indian tax rules, the first ₹1.25 lakh of equity long-term gains in a financial year is exempt, and anything above that is taxed at 12.5%. Gold ETFs do not receive that exemption, although their long-term gains are also taxed at 12.5%.

Using the index returns as a proxy for the two ETF categories, the numbers show how taxation narrows the advantage. On the Nifty 50 side, the ₹1 lakh investment would have generated a gain of about ₹7.98 lakh, leaving a tax bill of roughly ₹84,000 after the exemption. The final value comes to around ₹8.14 lakh. For gold, the gain would have been about ₹14 lakh, producing a tax bill of roughly ₹1.75 lakh and an after-tax value of about ₹13.25 lakh.

That leaves gold still ahead over the 20-year period, but its post-tax annualised return drops to 13.79% from 14.5%. The Nifty 50’s pre-tax annualised return of 11.6% falls to 11.05% after tax. The comparison is only an estimate: it uses Nifty 50 total return index data and gold returns adjusted for the dollar-rupee exchange rate as stand-ins for ETF performance, which means actual investor outcomes could differ once expense ratios and tracking differences are included.