I have around 200 grams of gold, which was purchased in 1986. I want to sell it and invest the entire amount in property. What would be the tax implications of this transaction?

- Krishan Kant Varshney

Gold qualifies as a capital asset, according to tax laws in India. Any income arising from its sale will be taxed as capital gains. In view of the fact that the capital asset has been held for more than 36 months, the gains from its sale would be taxable as long-term capital gains and the benefit of indexation would be available.

As per Income-Tax laws, long-term capital gains shall be computed by deducting the indexed cost of acquisition of the asset and the indexed cost of improvement, as well as the expenditure incurred wholly and exclusively in connection with such transfer, from the gross sale consideration received or accruing on the sale of the long-term asset.

You can avail an exemption from long-term capital gains (LTCG) tax by reinvesting the sale consideration in a new residential property (Section 54F), either by purchasing a new house one year before or two years after the date on which the transfer took place, or by constructing a new house within three years from the date of sale. In addition, you have to satisfy other conditions prescribed by law, such as not owning more than one house property, other than the new asset, on the date of sale of gold, and for the new property to be held for a period of at least three years. In case this is done, you will not be liable to pay any income-tax on the sale of gold.

Related Topics