Tax on Gold: Will heirloom gold jewelry be taxed? Learn about the income tax rules on gold jewelry...

Income Tax on Gold in India: Gold jewelry is considered a form of savings and investment. In every household, gold jewelry is passed down from generation to generation. People associate such heirloom jewelry with memories and emotions. But have you ever wondered what the tax rules are for gold jewelry? Are they subject to income tax?

Tax Rules on Gold Jewelry
People often think that heirloom jewelry is a gift and doesn't attract any tax. However, the Income Tax Act makes special provisions for it, which most people are unaware of. Let's find out what the actual tax rules on these jewelry items say...

No Tax on Inherited Jewelry
If you inherited gold jewelry from your mother, father, or grandparents, first of all, know that you don't have to pay income tax on it. This means that if you received the jewelry as a gift or inheritance (family heirloom), simply owning it isn't taxable. It's not considered income under the Income Tax Act.

When do you have to pay tax on gold jewelry?
The tax issue on such heirloom gold arises when you sell it. The profit you make at that time is subject to capital gains tax. This means you pay tax not on the entire value of the jewelry, but only on the profit you make from selling it.

How is tax calculated on selling gold?
The tax calculation considers the price at which your heirloom jewelry was purchased by the previous owner, i.e., your parents or grandparents. If the jewelry was purchased before April 1, 2001, the Fair Market Value (FMV) at that time is used. This cost is adjusted according to the Cost Inflation Index (CII) to account for inflation.

New tax rules apply from 2024
Previously, jewelry held for 36 months was considered a short-term capital gain, and tax was levied based on your income slab. However, the rules changed from July 2024. Now, holding jewelry for more than 24 months will be considered a long-term gain, and tax will be levied at a flat rate of 12.5%. Indexation benefits will no longer apply. If sold before 24 months, tax will be levied based on your income slab.

How can you get a tax exemption?
If you wish, you can invest this money in certain areas to avoid tax. For example, under Section 54F, if you sell jewelry and invest the entire proceeds in a residential property, you can get a tax exemption. Keep in mind that this exemption is subject to certain conditions.

Experts' Opinion
Experts say that heirloom gold is taxable only upon sale. Sections 56(2)(x) and 47(iii) of the Income Tax Act clearly state that there is no tax on acquiring jewelry. However, any profit earned on selling it will be considered a capital gain. Simply put, there is no tax on holding inherited gold, but capital gains tax will be payable on selling it.

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