Planning to sell your gold, diamond, silver, and other jewellery? Know income tax rules here

Is long-term capital gain from the sale of jewellery taxable for an individual whose income is lower than the basic exemption limit? If yes, what is the rate of tax on such capital gains?

Answer: Jewellery is treated as a capital asset, and any profit made from the sale of a capital asset is taxed as a capital gain. The capital gains can be taxed in the short or long term, depending on the holding period.

Jewellery profits taxed as long-term or short-term capital gains based on holding period

The holding period to make a capital asset, long-term or short-term, differs for different classes of capital assets. Profits on jewellery sales are treated as long-term capital gains if the jewellery is sold after 24 months. Otherwise, the same are taxed as short-term capital gains. Such short-term capital gains are treated like your regular income and taxed at the slab rate applicable to you.

The long-term capital gains, however, are taxed at a flat rate of 20% after indexation if the jewellery was sold before the 23rd of July 2024. Else. The long-term capital gains shall be taxed at a flat rate of 12.50% without indexation. In case the other income excluding such long-term capital gains is below the applicable exemption limit, and you are a resident for tax purposes, you are allowed to set off such long-term capital gains against such shortfall in basic exemption and have to pay tax only on the balance long term capital gains.

The basic exemption limit for the general category of taxpayers is Rs. 2.50 lakh. However, those who have completed 60 years and yet to complete 80 years enjoy a higher basic exemption limit of three lakh. Those over 80 enjoy basic exemption up to ₹5 lakh of income. If you opt for a new tax regime, the basic exemption limit is ₹3 lakh, irrespective of age.

You can claim exemption from paying long-term capital gains tax on jewellery if you invest the net sale proceeds in the purchase or construction of a residential house in India within a prescribed period, subject to the fulfilment of certain other conditions.

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Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant on his X handle.

Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.