Selling gold after price rise? Check tax on ₹10L sale
When gold prices increase, the prospect of selling old gold jewellery arises for those looking to purchase new pieces. Despite the potential for profitable capital gains, the taxation process must be considered. The tax amount hinges on the holding period of the jewellery and the costs associated with the purchase and sale. Additionally, a Goods and Services Tax (GST) along with making charges will be applicable when buying new jewellery.
According to Abhishek Soni, a chartered accountant and CEO of Tax2win, if gold jewellery has been held for over 24 months, the profit is classified as a long-term capital gain (LTCG), which is presently taxed at 12.5% without indexation. Conversely, if the sale occurs within 24 months, the gain is treated as a short-term capital gain and taxed according to the applicable income-tax slab rate.
The tax calculation on gold jewellery's sale depends on the original purchase cost and the date of purchase, rather than solely on the current value of the old gold. For instance, if one sells gold worth Rs 10 lakh, it doesn't automatically imply that tax will be paid on the full Rs 10 lakh. Soni emphasizes that the tax liability depends on the LTCG, which in this case is Rs 3.88 lakh.
To illustrate the potential tax burden, Soni provides an example using the Compound Annual Growth Rate (CAGR) of 17.16% for gold over the last 10 years. Assuming this return, a Rs 1 lakh investment in jewellery made a decade ago would be worth approximately Rs 4.88 lakh today, resulting in an LTCG of Rs 3.88 lakh. The seller needs to pay LTCG at 12.5% on this amount.
Based on Soni's calculations for gold taxation on old jewellery, where the holding period exceeds two years, the total tax on sales ranging from Rs 10 lakh to Rs 1 crore can be as high as 12.5% of the sale value plus 4% cess. For example, selling jewellery worth Rs 25 lakh could incur long-term capital gains tax of around Rs 2.62 lakh. The resulting net proceeds after accounting for tax and GST would be significantly lower than the initial sale value.
Written by urgent.news from The Economic Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
