Under Indian tax laws, the sale of gold, diamonds, silver, and other types of jewellery is subject to income tax regulations. Individuals planning to sell their jewellery should be aware of the tax implications, particularly how capital gains are treated, depending on the holding period and the seller's total income.
Jewellery is classified as a capital asset under the Income Tax Act. Any profit earned from its sale is taxed as either short-term or long-term capital gains based on the holding period. For jewellery sold within 24 months of acquisition, the profit is treated as short-term capital gain and taxed at the individual's applicable income tax slab rate.
Conversely, if the jewellery is sold after 24 months, the profit is considered a long-term capital gain. Long-term capital gains (LTCG) are taxed at a flat rate of 20% with indexation if the jewellery was sold before July 23, 2024. However, for jewellery sold after this date, LTCG is taxed at a reduced flat rate of 12.5% without indexation.
Individuals whose total income, excluding LTCG, is below the basic exemption limit can offset the shortfall against the LTCG, reducing their taxable amount. Individuals with incomes below the basic exemption limit can adjust the shortfall in their income against the taxable long-term capital gains. This provision allows taxpayers to reduce their tax liability.
The basic exemption limit is ₹2.5 lakh for most taxpayers, ₹3 lakh for senior citizens aged 60–80, and ₹5 lakh for super senior citizens above 80. Under the new tax regime, the exemption limit is uniformly ₹3 lakh irrespective of age. Taxpayers can also claim exemptions by reinvesting the sale proceeds into a residential property under Section 54F, provided specific conditions are met.
Gold prices have recently witnessed volatility due to certain macroeconomic factors.The rising US dollar and higher yields on bonds have put pressures on gold rates affecting the present rates at both domestic and international markets.
In the Multi Commodity Exchange (MCX), gold for February delivery was at ₹77,438 per 10 gram. Analysts blame this decline on profit booking and the resilience of the American economy characterized by strong job market fundamentals. These factors and geopolitical risks will therefore continue to sustain the fluctuation of precious metal prices in the short-run.
Selling involves monetary aspects apart from rules that govern the sale of products, including tax rules. Knowledge of these regulations enables people to act wisely concerning their taxes and in compliance with legal procedures.