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You can claim a tax exemption on long term capital gains from the sale of gold assets under Section 54F of the IT Act, 1961. Section 54F provides an income tax exemption on capital gains earned from selling capital assets such as shares, gold, bonds etc., other than a house property.

If you sell gold and reinvest the entire sale proceeds towards purchasing or constructing a house property, the capital gains you earn are allowed as a tax exemption under Section 54F.

For example, if you had purchased physical gold for 6 Lakh in FY 2012-13 and sold it for 10 Lakh in FY 2018-19, your long term capital gains are 1.6 Lakh (after indexation). If you invest the entire sale proceeds of 10 Lakh from gold in a house property, the capital gain of 1.6 Lakh will not be taxed in your hands.

However, you have to use the sale proceeds from gold in the following manner to claim this tax exemption:

  • You have to purchase a new residential property one year before the sale of the capital asset. OR
  • You have to purchase residential property within two years from the sale of the capital asset. OR
  • You have to construct a residential property within three years from the date of sale of the capital asset.

Suppose you are unable to utilise the entire amount of the sale proceeds to purchase/construct a new residential house property before the ITR filing due date. In such cases, you can deposit the sales proceeds from gold in a Capital Gains Account with a public sector bank. You can use this amount to purchase/construct a new residential house property within the requisite timelines.

Archit Gupta is the Founder and CEO of Clear

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