Income tax on gold and jewelery


Income tax on gold and jewelery – Investment in gold is done by most of the people in India, because gold is one of the safest ways of investment. Gold includes jewellery, gold coins and other types of gold.

Whenever gold is purchased by you , according to the income tax , it would be appropriate that you keep the invoice safe with you, so that whenever an inquiry comes from the Income Tax Department, you can tell the source of gold investment.

If you have proof of gold investment, then you will have the options of protection in case of income tax scrutiny .

Most of the people do both buying and selling of gold, but are not fully aware of the tax treatment involved in these transactions, due to which they have to face a lot of taxation related problems.

In today's article (income tax on gold and jewellery), we will discuss about the tax provisions related to selling gold.

income tax on gold and jewelery – How is income tax levied on gold?

Whenever you buy gold or jewellery, income tax is not levied on it. Income tax is levied only on the sale of gold or articles made from it.

Whenever you sell gold, the first thing to be seen for charging tax is whether it is income from your business or profession head or capital gains head .

When gold or articles made from it are sold by a gold dealer, it is treated as income in his business or profession head. Apart from this, if gold is sold by any person, then it is considered as income in his capital gains head.

Income in business or profession head will be added to your total income and then taxed as per slab rate.

When capital gains head is income, it is divided into short term capital gains and long term capital gains. In case of short term capital gain, it will be taxed as per your slab rate and in case of long term capital gain, it will be taxed at the rate of 20%.

Applicable surcharge and cess will also be added to the rate of 20%.

How will the profit from selling gold be separated into short term and long term capital gains?

To segregate gold into short term and long term capital assets , the period you have to hold it will be seen.

If you have held gold or jewelery for less than 36 months, then it will be treated as short term capital asset and profit from it will be short term capital gain, which will be taxed at slab rate.

Holding gold for more than 36 months will be considered as long term capital asset.

Apart from this, if you are receiving gold as a gift or bequest , then the holding period of its former owner will also be included in the calculation of its holding period.

For example, you received gold worth 1 lakh in May 2018 from your father's will, which your father had bought in 2010, in this case whenever you sell the gold, you will have to pay tax and the holding period of the gold. The calculation will be done from 2010, when your father bought gold.

income tax calculation on sale of gold and jewellery –

The tax will be calculated after separating the income from the sale of gold or jewelery into short term and long term capital gains.

short term capital gain calculation –

Such income will first be included in your total income and after that it will be taxed according to the slab rate.

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Q – You bought jewelery worth 2 lakhs in May 2018 and sold it in January 2020 for 3 lakhs.

A – In this case the jewelery sold by you is short term capital asset as you have held it for less than 36 months. Hence your short term capital gain will be 1 lakh and it will be included in your total income.

If you do not have any other income, then this 1 lakh income will be considered as your total income. In this case, if your total income is less than the taxable limit, then this income will not be taxed.

long term capital gain calculation –

Your purchase cost will be indexed to calculate long term capital gain.

Q – You bought jewelery worth 2 lakhs in May 2015 and sold it in January 2020 for 3 lakhs.

A – In this case you have held the jewelery for more than 36 months, so in this case it will be considered as long term capital asset, for which indexation of your cost will be done first –
Long Term Capital Gain Calculation 
ParticularAmount
Sale Value300000
Less : Cost of Indexation
200000*289/254227559.06
Long Term Capital Gain72440.94


Cost Inflation Index – 2015-16 (254 ) & 2019-20 (289 )

In this case the long term capital gain will come to 72440 (round off) and will be included in your total income, where it will be taxed at 20% and if you have no other income, the slab rate benefit will be given to you. will go.

In this way, tax treatment is done on the transactions done in gold or its products, we will discuss in another article about the rules related to investment in gold bonds or gold monetization scheme.
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