When you sell your old jewelry to buy a new piece of jewelry, you are expected to pay capital gains tax on the sale. It is vital to note that the sale of gold, even for the purpose of purchasing a new piece of jewelry, is considered the sale of an old asset.
In Budget 2024, Finance Minister Nirmala Sitharaman amended the rules regarding capital gains. Under the new rules, any non-financial asset – when sold after more than two years of purchase – will be subject to a capital gains tax of 12.5 percent, without indexation. When the asset is sold in less than two years, it is considered a short-term capital gain and the gains are added to the total income to be taxed at the slab rate.
Is an exemption allowed?
You can, however, claim an income tax exemption if you use the sales proceeds to purchase a home. “Under Section 54F, one can claim income tax exemption when the sale proceeds are used to purchase a property. When the gold or other precious metal is sold to purchase new assets, it is considered a new purchase and the capital is taxed. profit from the sale,” says Chirag Chauhan, a Mumbai-based chartered accountant.
Suppose you sold gold that you bought more than two years ago and realized a capital gain of ₹50,000. Your tax liability on that would be ₹6,250 (12.5 x 50,000/100). You must also pay a 4 percent fine ( ₹250) on it, which makes it ₹6,500.
These rules came into effect on July 23 with the introduction of the Finance Act 2024. “If you exchange old jewelery for new, it is considered as sale of old jewelery and is subject to income tax. The 12.5 per cent tax will be applicable without indexation in case of long-term capital gains if gold is sold after July 23, 2024,” said Pratibha Goyal, a Delhi-based chartered accountant and partner of PD Gupta & Company.
Digital gold
When you buy new jewelry, you owe 3 percent VAT, regardless of whether existing jewelry has been sold or not. This is believed to be one of the reasons for the popularity of digital gold. “We are seeing strong interest in digital gold across the country. Delhi-NCR, Hyderabad and Bangalore are the top three cities for digital gold investments, accounting for 22 percent of total investments,” said Bipin Preet Singh, co-founder and CEO, MobiKwik.
Sridharan S, Founder, Wealth Ladder Direct, says, “If you buy digital gold, you will save 3 percent GST levied on the yellow metal. Moreover, you will also save on fees which can go up to 10-15 percent. total bill.”
