Do you have to pay tax on inherited gold? Know when liability kicks in

Gold passed down from family is not taxed as income. Experts explains when capital gains tax applies on sale and what options you have to ease the burden

Gold jewellery passed down through generations is often more about sentiment than value, but it also raises questions about taxation. Chartered accountants clarify that inheriting such assets does not immediately create a tax bill. The liability arises only when you decide to sell them.

No tax on inheritance

 

“Inheritance is not treated as income under the Income Tax Act. So if you inherit gold jewellery, there is no tax liability at that stage,” says Chartered Accountant Ruchita Vaghani, who recently explained the rules in a social media post. Simply put, receiving gold from parents or grandparents does not count as taxable income. 

 

 

When does the tax apply?

 

Taxation kicks in when you sell the inherited gold. The gains are treated as long-term capital gains (LTCG) regardless of how long you have held the jewellery.

 

·  The cost of acquisition is taken as the original purchase price.

 

·  If the jewellery was bought before April 1, 2001, the fair market value (FMV) as on that date can be considered.

 

·  Since it is always treated as a long-term asset, the benefit of indexation, which adjusts cost for inflation, is available.

 

“Whenever inherited gold is sold, the profit is taxed under long-term capital gains with indexation benefits,” explains Vaghani. 

 

How much tax is payable?

 

Here’s how the tax is calculated:

 

·  Sale price of the jewellery- (minus) Indexed cost of acquisition = Long-term capital gain (LTCG)

 

- The LTCG is then taxed at 20 per cent, plus surcharge and health and education cess.

 

For instance, if gold worth Rs 2 lakh (inherited in 2010) is sold today for Rs 6 lakh, the cost will first be adjusted upwards using the Cost Inflation Index. The tax will apply only on the inflation-adjusted profit, not the entire Rs 6 lakh.

 

Can you save tax on such gains?

 

Section 54F of the Income Tax Act allows exemption if the full sale proceeds are invested in a residential property, subject to conditions. This option can help taxpayers lower or eliminate their tax outgo on gains from inherited jewellery.

 

In short, inheriting gold jewellery does not attract any tax. The liability arises only on sale, and even then, indexation benefits and reinvestment options can ease the burden.