Tax on inheriting gold or receiving it as a gift

There is no tax on inheriting gold from ancestors unlike purchase of gold. As for gifts, when the aggregate of all gifts received by a person exceeds Rs 50,000 in a year, it is taxed in their hands.

Only gifts received at the time of marriage and from close relatives are exempt from tax. Close relatives include, spouse, parents, grand parents, parents of your spouse, siblings, siblings of your spouse, uncle, and aunts.

Treatment of sale proceeds from gold

Note that only profits from sale of gold is eligible for income tax and not all of the sale proceeds. The profits made are termed as "capital gains" and come under the "Income from capital gains" category in the Income Tax Returns form.

It is further categorized "short term capital gains" and "long term capital gains" based on duration.

How is capital gain on sale of gold calculated?

STCG= Sale price - purchase price
LTCG= Sale price - indexed cost of purchase price

How to calculate purchase price?

While sale price is pretty straight forward, the purchase price of inherited gold is the price your ancestor (who made the purchase) paid for it.

If inherited before 1 April 2001, you can use the Fair Market Value (FMV) as on 1 April 2001 or the price at which it was purchased by the previous owner.

If inherited after 1 April 2001, the cost of purchase of the previous owner is the cost of purchase price.

Gold Monetisation Scheme

This a government scheme launched to help individuals and institutions monetise ideal gold lying in households.

The scheme can be availed at banks, where customers can deposit their gold in return for interest between 2.25 to 2.50 percent.

The main benefit of the scheme is that interest earned and capital gains made from this scheme is completely exempt from tax.

Physical gold in any form can be deposited with the bank under this scheme, however, jewellery with embedded stones will not be accepted. There is no upper limit for the quantity deposited. The minimum deposit limit is 30 grams of 99.5 percent purity.

One can deposit the gold for tenures ranging between 1 year to 15 years.

Note that the gold you deposit will not remain in the same form. It will be used by the bank and changed into bars and coins. When you withdraw, either before or after the end of your term, you can either avail gold in the form of bars, coins or equivalent amount.

Documents

It is important to maintain documents of inheritance, like a will, to show a record of date of acquiring the gold assets.