The Finance Ministry on Monday slashed the tariff value on gold imports to Rs 421 per 10 grams from an earlier Rs 450 per 10 grams set on June 15.
This move comes at a time when gold prices had been showing a bearish trend this past week.
Prices touched $ 1,268.70 an ounce on June 21, the lowest since September 2010.
Gold prices have hit a 20-month low as the US Federal Reserve laid out plans for slowing its bond-buying programme if the US economy continues to improve.
Gold tumbled into a bear market in April and is poised to fall further in the coming days, say market observers.
Tariff value is the base price on which customs duty is levied.
The Finance Ministry had recently hiked the customs duty on gold imports to 8 percent from 6 percent earlier, in an apparent bid to discourage gold imports.
India’s gold and silver imports touched a whopping $ 15.8 billion in April-May, adding pressure on current account deficit.
Both the Government and RBI have taken several measures in recent days to discourage gold imports.