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Here’s Why You Should Preserve The Receipts/Bills Of Your Gold Purchase

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When you purchase an article of gold, the receipt or bill received will act as a reference for the weight or price or date of purchase made, however, these also have tax implications.

At the time of income tax return filing or any income tax-related issues, an invoice for your gold purchases, whether jewellery or bullion, will act as the proof of the source of investment with your taxable income.

Here’s Why You Should Preserve The Receipts/Bills Of Your Gold Purchase
 

As per the Central Board of Direct Taxes' (CBDT) circular dated 1 December 2016, there is no limit on how much gold you can possess, as long as you can explain the source of investment or inheritance. It is essential that the gold possessed is in line with the taxpayer's income as it needs to be bought with a disclosed source of income.

If you cannot explain the source of the gold, an income tax assessing officer holds the authority to confiscate it.

The tax officers have been instructed by CBDT to not seize gold ornaments and jewellery up to 500 grams from a married woman, 250 grams from an unmarried woman and 100 grams from a male member of the family.

You do not need to worry if have been purchasing precious metals from your taxable income but it is advisable to maintain records of the purchase. Even if you exchange the jewellery, preserve previous bills.

The gold purchase could be in jewellery, bars or coins and could have been purchased using credit/debit card or cash, as long as it has been purchased with your taxable income, your purchases are not questioned.

However, if you come under the income tax department's scrutiny, especially at the time of sale of the jewellery, invoices of these purchases will come handy.

If you make over Rs 50 lakh per annum from any source of income, you are required to disclose your gold holding under assets-liabilities schedule at the time of filing income tax return.

Inherited gold

 

In case of inherited gold, you may disclose the price paid by original buyer and if you do not have the original price details, you can disclose the fair market value as on 1 April 2001.

There is no limit on how much inherited gold you can possess.

The income tax authorities may also choose to determine the source of gold in consideration with family customs, social status, etc if no documentary evidence is available.

Taxation

At the time of sale of a gold asset, there are tax implications on the profit made. These are known as capital gains and are liable to short-term or long-term capital gains tax, as applicable.

If the metal was in your possession for less than three years, short-term capital gains tax will be applicable, wherein the entire gain is added to your income and taxed as per your slab.

As for long-term capital gains, that is, gold held for over 3 years, the profits will be taxed at 20 percent after indexation.

For computation of this gain or loss on the sale of gold, receipts of purchase will act as proper evidence to the income tax officer, if verification is required.

Read more about: gold income tax
Story first published: Friday, December 6, 2019, 15:43 [IST]
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