Taxation Comparison: Gold Coin vs Gold Jewellery

Taxation Comparison: Gold Coin vs Gold Jewellery

Tax Implications of Selling Inherited Gold

Nature of Inherited Gold : No tax is levied at the time of inheritance. Receiving gold through inheritance (from parents, grandparents, etc.) is not taxable in itself. It is exempt under Section 56(2)(x) of the Income Tax Act. Inherited gold is not treated as income under the Income Tax Act.

When Does Tax Arise?

• Tax is applicable only when you sell the inherited gold. When you sell inherited gold, the capital gains tax applies.

• The gain is calculated as Sale Price – Indexed Cost of Acquisition

• Capital Gains Tax is calculated based on:
  • Original purchase price by the previous owner (e.g., parent/grandparent), or
  • Fair Market Value (FMV) as on 1st April 2001 (if acquired before that date).
• Holding Period: Always treated as a Long-Term Capital Asset.

How Is Tax Calculated?

• Always treated as Long-Term Capital Gain (LTCG), regardless of how long you held it, because the holding period of the original owner is also counted.
• You can use Cost Inflation Index (CII) to adjust the original purchase price. If the gold was acquired before April 1, 2001, you can use the Fair Market Value (FMV) as on April 1, 2001 as the base. Use Indexed Cost of Acquisition (adjusted using the Cost Inflation Index).
• LTCG on gold is taxed at 20% with indexation under Section 112 of the Income Tax Act. & Surcharge and cess may apply additionally. Tax Rate is 20% LTCG tax + Surcharge + Health & Education Cess.
• Example:
  

  LTCG = Sale Price – Indexed Cost of Acquisition
  Tax Payable = 20% of LTCG + applicable surcharge/cess

• Exemptions & Savings Options
• • Section 54F: Reinvest entire sale proceeds in a residential house (subject to conditions).
  • Section 54EC: Invest up to INR 30 lakh in Capital Gain Bonds (e.g., NHAI, REC) within 6 months of sale.
• Documentation to Keep
• • Proof of inheritance (will, gift deed, legal heir certificate)
  • Original purchase invoice (if available)
  • Valuation certificate (especially if FMV as on 01.04.2001 is used)

Summary: Taxation Comparison: Gold Coin vs Gold Jewellery

• Capital Gains Taxation : Same for both (coins & jewellery) under Income Tax Act.

• GST Impact :Jewellery costs more due to GST on making charges, while coins are more tax-efficient.

• Resale Taxation : No GST on resale by individuals, but jewellery loses value due to non-tax factors (making/wastage).