Income Tax Tips: You will not have to pay even a single rupee tax on selling gold, know this section of Income Tax..
You have to pay Capital Gain Tax on selling jewellery. However, there is a way by which you can avoid paying this capital gains tax. For this, you will have to give tax exemption under Section 54F of the Income Tax Act.
This section says that if a person sells a property and uses the entire amount received to buy a house, he can claim tax exemption. This wealth includes stocks and bonds as well as jewelery and gold. This means that if you sell jewellery, and invest the entire amount received in buying a house, you can avoid paying taxes.
Recently, an Income Tax Appellate Tribunal (ITAT) of Bengaluru has also clarified this rule. A case came before the tribunal in which a person had sold inherited jewelery and invested the money in a house property. However, the Assessing Officer refused to give the person exemption under Section 54F and demanded tax on the profit made from selling jewellery.
The matter went to court, where the Bengaluru-based ITAT ruled in favor of the man and said he was entitled to exemption on long-term capital gains tax under section 54F. Besides, this decision has also made it clear that you can avail of this tax benefit even by selling inherited gold and jewellery.
According to the current rules, if you sell jewelery after holding it for more than 3 years, you have to pay long-term capital gains tax, which is currently around 20 percent. Whereas if you sell jewelery in less than 3 years, then you have to pay short-term capital gains tax, which is paid as per the income tax slab.
However, a person can avail of benefits under Section 54F only if he has purchased a house one year before or two years after selling the jewellery. Or the construction of his house property should be completed within 3 years of selling the jewellery. Apart from this, it should also be noted that this exemption is only on residential property. If you own commercial property, you cannot avail of this tax exemption.
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