Did soaring Gold price get you to invest to make money? Know these income tax rules

Gold price has been making new high during the Coronavirus crisis and the recent high on MCX is 47,929 per 10 gm and experts are of the opinion that it may further scale up to Rs 51,000 per 10 gm.

Your investments in gold products is, generally, treated as capital asset and any profit on sale of such products is taxed under the head Capital Gain. Photo: Reuters

Gold price has been making new high during the Coronavirus crisis and the recent high on MCX is 47,929 per 10 gm and experts are of the opinion that it may further scale up to Rs 51,000 per 10 gm. In such a scenario, people may look at gold as an investment haven but at the same time they need to know the income tax rules being applied on physical gold investments.

Tax on physical gold

Speaking on the income tax rule involved in physical gold investments, Balwant Jain, a Mumbai-based tax and investment expert said, "Your investments in gold products is, generally, treated as capital asset and any profit on sale of such products is taxed under the head Capital Gain”. However for dealers in gold and gold products, the profits are taxed as business income under the head Profits and Gains of Business of Profession. The taxation of capital gains depends on the period for which you held your investments in gold. For gold products held for more than 36 months, the profits on sale are taxed as long term at flat 20.80 per cent. In case the same are held for less than 36 months, the profits are taxed as short term and clubbed with your other income and taxed like your regular income."

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Elaborating upon the income tax rules on gifts received in form of physical gold, Jain said, "In case gold jewellery is received by you as a gift, the same is fully exempt in case the aggregate value of all the gifts, whether in cash or in kind, does not exceed Rs 50,000 in a year. However, once the value of all the gifts taken together including the gold jewellery exceeds Rs 50,000, the entire value of gift becomes taxable in your hand during the year in which the gift was received."

Highlighting the income tax exemption on gifts received in form of physical gold; SEBI registered tax and investment expert Jitendra Solanki said, "Please note that in case gifts are received from your close relative like your parents, siblings etc. are fully tax exempt in your hand at the time of receipt. Even gifts received at your marriage are fully tax-free. Gold received from anyone under a Will or under law of succession is also fully exempt."

However Jain said, "Though the gifts received may be exempt but the profits on sale of these gold assets become fully taxable in your hand. For computing profit on sale of such asset, the cost will be taken as the value at which any of the previous owners had acquired it for consideration. The holding period for capital gains of such gold is computed with reference to the period from the date when it was bought by any of the previous owner."

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