A gift of gold is considered auspicious, valuable and precious. But what are its tax implications? Let’s take a look.
The term ‘gift’ was initially spelled out for tax purposes under The Gift Tax Act 1958. The latter got revoked thanks to the Finance Act 1998. Later, the Finance Act 2004 resurrected the gift tax and placed it in the income tax system.
According to this act, gifts can be:
spouses, siblings, parents, or any direct family member, any individual in a Hindu Undivided Family (HUF). However, any income gained from the gift can be taxed!
be it from friends or family are tax-free. The receiver is advised to get the wedding date (or a date closer) on the gift deed, a document which describes the transfer of gift from giver to the receiver without any exchange of money and comes handy as a proof of the integrity of the gift as it identifies the giver, receiver, and description of the gifted gold jewellery. It also doubles up as protection against ownership claim by another person. Details about the jewellery need to be disclosed only if the receiver’s annual total income exceeds the prescribed limit for each relevant assessment year. For the year 2016-17, it was INR 50 lakhs. Also note, if parents or relatives of the couple receive gold as a gift, it’ll be taxable.
Gifts by way of a will or a legacy.
However, make sure you have:
Limits of the Gold Gift Act:
If gifts from non-relatives are worth INR 50,000 or less, the receiver doesn’t have to pay tax. If jewellery is worth more than INR 50,000, the entire amount is put under ‘income from other sources’, clubbed under total taxable income, and taxed as per the rate of your income tax slab.
Additionally, if the gifted gold is sold within three years, any profits will trigger a short-term capital gain at the applicable income tax slab rate. Profits from sale after three years are taxed as long-term capital gains at the rate of 20.6% with Indexation. The indexation rate is notified by the Central Board of Direct Taxes (CBDT). If it’s unavailable, the cost price will be the fair market value as on the date of purchase by the giver.
Exemption from long-term capital gains can be claimed by investing in RECL (Rural Electrification Corporation Limited) BONDS or NHAI (National Highways Authority of India) BONDS or a residential house property. These exemptions are available subject to certain conditions.
Do remember that these limits:
Also, search officials have the discretion to not seize higher quantity based on factors such as family customs and traditions
A gift of gold allows your loved ones to benefit from the immense social, economic, and aesthetic value of gold. Here is hoping the tips above can help you make an informed purchase the next you are looking to buy one.