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How Is Income From Sale Of Inherited Gold Taxed In India?

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With gold prices in India touching new highs, it is a good time to cash your gold assets. Some of you may be looking to sell jewellery, coins or bars inherited from your ancestors.

In this article, we will look at the tax implications on gold when sold and not when it is bought. The income tax rules depend on the duration of holding the metal and profit made.

Tax on inheriting gold or receiving it as a gift
 

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

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.

Holding period Type of capital gain Tax rate
Less than 36 months Short-term capital gains As per taxpayer's income tax slab
Over 36 months Long-term capital gains 20% with indexation benefit
How is capital gain on sale of gold calculated?

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?
 

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

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

Documents

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

Read more about: gold tax income tax
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