I want to sell gold inherited from my grandmother. What are the tax implications?

Taxation of inherited gold

Gold has long been a favourite asset class for Indians, often passed down from one generation to the next. Today’s query addresses the tax implications of selling inherited gold jewellery. Moneycontrol’s Ask Wallet-Wise initiative offers expert advice on personal finance and money-related queries. You can email your queries to askwalletwise@nw18.com, and we will get top financial experts to address them.

I received gold jewellery from my late mother on three occasions—at the time of my wedding in 1981, and during the birth ceremonies of my two children. My mother herself had inherited this jewellery from her parents. Due to current financial needs, I now intend to sell some of this gold. Can you explain the tax implications?

Expert Advice: As a retired individual planning to sell inherited gold jewellery, it is important to understand the tax provisions under the Income-tax Act, 1961. Gold jewellery, even if received through inheritance, is treated as a capital asset. Consequently, any gains arising from its sale are subject to capital gains tax.

In this case, the jewellery was received from the late mother on three occasions: in 1981 during the wedding, and during the birth ceremonies of the children in 2001 and 2005. The tax treatment depends on the original date and cost of acquisition in the hands of the previous owner.

For inherited assets, both the date and cost of acquisition are taken from the original owner. For jewellery received in 1981, either the cost to the mother or the fair market value (FMV) as of 1st April 2001, whichever is higher, can be considered.

For jewellery inherited in 2001 and 2005, the cost of acquisition will be that incurred by the mother or, if she too had inherited it, by the grandmother. The option to consider FMV as of 1st April 2001 is available only if the inheritance occurred before that date. If documentary proof of the cost is unavailable, valuation may be based on historical price references published by jewellers or associations, supported by a valuer’s certificate/report.

From 23rd July 2024, the Finance Act (No. 2) of 2024 has introduced an important change: the holding period for long-term capital assets in the case of gold has been reduced from 36 months to 24 months.

Accordingly, if gold jewellery is sold after a holding period of more than 24 months, the gains are classified as long-term capital gains (LTCG) and taxed at a flat 12.5% rate without indexation. If jewellery is sold within 24 months, the gains are classified as short-term capital gains (STCG) and taxed at the applicable income-tax slab rate.

In this case, the jewellery was inherited decades ago, so the holding period condition is comfortably met. Therefore, the gains will be treated as long-term capital gains. As the sale occurs on or after 23rd July 2024, the applicable tax rate will be 12.5% without indexation.

Disclaimer: The views expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions