Is the long-term gain from the sale of jewelry taxable to an individual whose income is less than the basic exemption limit? If so, what is the tax rate on such capital gains?
Answer: Jewelry is treated as a capital asset and any profit made from the sale of a capital asset is taxed as a capital gain. The capital gains can be taxed in the short or long term, depending on the holding period.
Jewelry gains are taxed as long-term or short-term capital gains based on the holding period
The holding period for creating a capital asset, long or short term, differs for different classes of capital assets. Profits from the sale of jewelry are treated as long-term capital gains if the jewelry is sold after 24 months. Otherwise, these are taxed as short-term capital gains. Such short-term capital gains are treated as your regular income and taxed at your applicable rate.
However, long-term capital gains are taxed at a flat rate of 20% after indexation if the jewelry is sold before July 23, 2024. Otherwise. Long-term capital gains are taxed at a flat rate of 12.50%, without indexation. If the other income excluding such long-term capital gains is below the applicable exemption limit, and you are a tax resident, you may offset such long-term capital gains against the basic exemption shortfall and must pay tax on the balance of the long-term capital gains only.
The basic exemption limit for the general category of taxpayers is Rs. 2.50 lakhs. However, those who have completed 60 years and are yet to complete 80 years will enjoy a higher basic exemption limit of three lakh. People over 80 enjoy a basic exemption up to ₹5 lakh income. If you opt for a new tax regime, the basic exemption limit applies ₹3 lakh, irrespective of age.
You can claim exemption from paying long-term capital gains tax on jewelery if you invest the net sale proceeds in the purchase or construction of a residential property in India within a prescribed period, provided certain other conditions are met.
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Balwant Jain is a tax and investment expert and can be reached at jainbalwant@gmail.com and @jainbalwant on his X handle.
Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to contact certified experts before making investment decisions.
