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The article delves into the tax implications of selling old jewelry in India, shedding light on the capital gains tax levied on such transactions. It clarifies that even when selling old jewelry to purchase a new piece, the sale is considered a disposal of an old asset, subjecting it to capital gains tax. The Finance Minister's recent amendments to capital gains tax rules are highlighted, stating that any non-financial asset sold after more than two years of purchase attracts a 12.5% capital gains tax without indexation. Sales within two years are considered short-term capital gains and are taxed at the individual's income tax slab rate.
The article explores an exemption provision under section 54F, allowing individuals to claim tax exemption on the sale proceeds if used to buy a property. This means that if someone sells their old jewelry to purchase a new property, the capital gains tax can be avoided. The example of selling gold purchased over two years ago and generating a ₹50,000 capital gain illustrates the calculation of tax liability: 12.5% of ₹50,000, resulting in ₹6,250, plus a 4% cess of ₹250, totaling ₹6,500 in tax. These rules came into effect on July 23, 2024, with the introduction of the Finance Bill 2024. Notably, exchanging old jewelry for new is treated as a sale of old jewelry, and the tax rules apply accordingly.
The article also touches upon the 3% Goods and Services Tax (GST) applicable on the purchase of new jewelry, irrespective of whether old jewelry is sold or not. This tax burden, coupled with the capital gains tax, has potentially contributed to the rising popularity of digital gold investments in India. Digital gold platforms offer a convenient and potentially tax-efficient way to invest in gold. The article cites MobiKwik, a digital payment platform, noting the significant traction they are observing for digital gold investments, particularly in major cities like Delhi-NCR, Hyderabad, and Bangalore. This trend suggests a growing interest in digital gold as a preferred investment option.
Source: Planning to exchange old jewellery for new? Know the income tax rules