Gold Tax in India 2017
capital gain on sale of gold: short term, long term and calculation
Income Tax Act of India specifies that profit from sale of gold bars, jewelry, coins or utensils or any other form of precious metal will attract tax under capital gains. The profit on sale of your gold holding is taxable under the head "Capital Gains" of Income Tax. Only exception to this is in case of gold dealers who transact in gold as a part of their business, where profit on such transactions is taxable under the head "Income from business or profession".
Capital Gain Tax on Gold, Gold Jewelry, Bars, ETF, Gold Coins, Gold utensils etc.
|Type of Gain||Holding Period||Capital Gain Tax Rate||Exemption|
|Short term capital gain on gold||Less than 3 years||As per the tax slab applicable to the assesee||None|
|Long term capital gain on gold||More than or equal to 3 years||20% with indexation benefit||Exemptions available if the net proceeds are invested in Section 54EC bonds or in residential property section 54F|
Short term capital gain on gold bars, gold coins, gold ETF's etc.
When you sell your gold asset which may be in the form of gold jewelry, coin or ETF within three years of its date of acquisition, any gains arising from such sale will be considered as short term capital gain. The profits earned from the sale of gold in case of short term capital gain will be taxed as per the marginal income tax slab applicable to individuals and HUFs. The profit or gains earned is added to your regular income which is taxed as per the income tax slabs prescribed by Income Tax Department.
For the current Income Tax slabs, you can refer to guide of income tax slabs for FY 2016-17, AY 2017-18 .
For example: Mr. A purchased gold coins worth Rs. 2 lakhs on 1st April, 2014 and sold the same for Rs. 3 lakhs on 31st March, 2016.
Mr. A has earned a profit of Rs 1 lakh on sale of gold loans which will be treated as capital gains. Since the period of holding is less than 3 years, the gain will attract short term capital gains tax under Income Tax Act. The tax rate applicable will correspond to Mr. A's marginal tax rate slab in the relevant year.
Long term capital gains on sale of gold bars, gold coins, ETF's etc.
When you sell your gold jewelry or coins or ETF after three or more years from the date of acquisition purchase, the profit arising from the sale will be categorized as long term capital gains. Long term capital gain earned from sale of gold assets carries a tax rate of 20% along with applicable surcharge and education cess. The profits earned under LTCG are taxable under the separate head of long term capital gains and is eligible for the benefit of indexation of the acquisition cost of gold assets. The long term capital gain is computed by reducing such indexed cost from the net selling price realized.
For example: Mr. A purchased gold coins of Rs. 500,000 lakhs on 1st April, 2012 and sell the same for Rs. 700,000 lakhs on 31st March, 2016.
Mr. A has earned a profit of Rs 2 lakh on sale of gold loans which will be treated as a capital gain and hence, attract capital gains tax. Since the period of holding is more than 3 years, the capital gain will be categorized as long term capital gains and will be taxable at the rate of 20%. Mr. A can avail the benefit of indexation and will be liable to pay tax on the difference between selling and indexed cost of acquisition of gold coins. Indexed cost of acquisition is higher than the actual cost of acquisition and hence, capital gains computed will be less than Rs 2 lakh.
Available exemptions on long term capital gains arising from the sale of gold
Income Tax Act provides tax exemptions on long term capital gain from sale of gold assets under Section 54EC and 54F.
Exemption available under Section 54EC: Section 54EC of Income Tax Act exempts capital gains tax on capital gains arising from the sale of gold, if you invest the sale proceeds in capital gains bonds issued by NHAI, REC, NHB and other specified public sector entities under Section 54EC. The maximum amount of capital gains that can be invested in these bonds in a financial year is Rs. 50 lakh. The investment must be made within six months from the date of sale of asset.
Exemption available under Section 54F: Section 54F of Income Tax Act exempts from capital gains tax arising from sale of gold, if you invest the sale proceeds in residential property as specified under section 54F. You can claim the deduction on one residential property that is bought within 1 year before or 2 years after the sale of gold assets or for construction of one residential property within 3 years from the date of transfer.
Tax on Gold Gift
Tax on gold received as gift or inheritance
If you receive gold or a gold asset as a gift, it will be taxable at receipt under the head "Income from other sources",- if the aggregate value of gifts including gold received during the year exceeds Rs. 50,000.
However, there are some exemptions available on movable gifts (including gold).
- Aggregate value of gifts is less than Rs 50,000 in a year
- Gifts are received from relatives specified in the Income Tax Act, which include
- Spouse of an individual
- Brother or sister of an individual
- Brother or sister of spouse of an individual
- Brother or sister of either of parents of an individual
- Any lineal ascendant or descendent of an individual
- Any lineal ascendant or descendent of spouse of an individual
- Gifts are received on the occasion of the marriage of the individual from friends or relatives
- Any asset received as inheritance either under will or under law of succession which is applicable to you.
Tax on sale of gold assets received as gift or inheritance
You are liable to pay capital gains tax at the time of sale of gold assets that have been gifted or inherited by you. In this scenario, you are liable to pay capital gains tax on the entire sale proceeds of gold assets, as the cost of acquisition in case of gifted or inherited gold is taken as nil.
The applicability of short term or long term capital gains tax will be based on the combined holding period of the gold asset which includes the period during which it was held by the previous owner who had actually paid for it and the period the gold has been with you before sale. If the combined holding period is more than 3 years than the gain will be considered as long term capital gains and if the combined holding period is less than 3 years then the gain will be considered as short term capital gains.
If the gain qualifies as long term capital gains, it will be taxable at the rate of 20%. If the gain qualifies as short term capital gains, then tax rate corresponding to the normal rate for the assessee as determined based on his total income is applicable.
Tax on sale of gold deposit certificate under Gold Monetisation Scheme
The gold deposit certificates issued under the Gold Monetisation Scheme, 2015 are not treated as capital assets for the purpose of calculating capital gains under Income Tax Act. Any profit arising from sale of these certificates is fully exempted from tax. Further, interest earned on such certificates is also tax exempt
Tax on sale of Gold Sovereign Bonds
Profit from sale of Gold Sovereign Bonds is fully exempt from tax. However, interest earned on Gold Sovereign Bonds is taxable as per the applicable Income Tax provisions.