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Home >Money >Personal Finance >Sale of jewellery: Income tax rules on gains explained

Is long-term capital gains from the sale of jewelry taxable for an individual whose income is lower than the basic exemption limit? If yes, what is the rate of tax on such capital gains?

Answer: Jewelry is treated as capital asset and any profit made on sale of a capital asset is taxed as capital gain. It can be taxed as short term capital gains or long term capital gains depending on the period for which the jewelry was held. The holding period to make a capital asset is different from different class of capital assets.

Profits on sale of jewelry are treated as long term if the jewelry is sold after three years else it becomes short term if sold within three years. Such short term capital gains are treated like your regular income and taxed at the slab rate applicable to you. The long term capital gains however are taxed at flat rate of 20% after applying indexation.

In case the other income excluding such long term capital gains is below the exemption limit and if you are a resident for tax purposes, you are allowed to set off such long term capital gains against such short fall and have to pay tax only on the balance long term capital gains.

The basic exemption limit, for general category of taxpayers, is Rs. 2.50 lakh. However those who have completed 60 years and yet to complete 80 years enjoy higher basic exemption limit of three lakhs. Those over 80 years of age enjoy basic exemption up to Rs. 5 lakh of income.

You can claim exemption from payment of long term capital gains tax on jewellery if you invest the net sale proceeds for purchase of a residential house in India subject to fulfilment of certain conditions.

The writer is a tax and investment expert and can be reached at jainbalwant@gmail.com

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