Inheritance versus taxable income Receiving gold jewellery as inheritance does not constitute taxable income under Indian taxation laws, and hence you won't have any direct tax liability when you receive it. Gold inherited by you from your relative is considered a capital asset and not as income and thus is not taxable. That doesn't mean that inheriting gold results in any tax liability or reporting on your part.
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When tax kicks in Tax is only incurred when you decide to sell the inherited gold. In that case, capital gains tax is applied—not as a percentage of the entire sum, but on the profit made. Cost basis is either the initial price it was bought for by your predecessor or, if it had been acquired prior to April 1, 2001, the fair market value then. The time of holding includes the period of ownership of both the current and previous owner such that the gain is generally regarded as long-term.
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Calculation of tax on sale Long-term capital gains (LTCG) on inherited and sold gold are taxable. For holding periods exceeding 24 months, 12.5% tax has to be paid without indexation, as modified in 2024. Gains for less than 24 months' holdings will attract your applicable income tax slab. For determining gains accurately, apply the indexed cost of acquisition, if any, and the appropriate rate depending on the time of holding.
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Exemptions available While there is a tax on sale, the Income Tax Act provides for a few exemptions. You can claim exemption under Section 54F if you reinvest the sale proceeds entirely in a residential house within the given timeframes. Section 54EC, which covers capital gains on land or building, is not applicable to investments in gold.
Record-keeping and compliance It is essential to maintain accurate records of the jewellery inherited. This includes inheritance records such as a will or succession certificate and original purchase records, where available. These records define cost of acquisition and prevent disputes with the taxation authorities. In the absence of specific proof, the taxing authorities can apply their own fair market value, which can result in a higher tax burden on the beneficiary.
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Why it matters Even though the receipt of gold in itself is not taxed, failing to plan for tax at sale can lead to unexpected liabilities. Properly determining gains, choosing the proper holding period approaches, and researching exemptions through reinvestment will help keep your tax bill minimal. It's worth considering looking at your timeline and reinvestment options before selling inherited gold.
