Investment in Gold and Related Tax Issues
When an Assessee makes an investment in gold, it does not have any tax implications. However, any income received from the sale of items made of gold does attract taxes.
The Income Tax Act of 1961 clearly states that silver, gold, and platinum ornaments or ornaments made from any other precious metal, precious or semi-precious stones, whether standalone or part of any furniture, utensils and any other articles, or worked upon or sewn into clothes etc. are considered Capital Assets.
The taxable income that one receives upon sale can therefore be treated as Short-term or Long-term gain. While gold ornaments or other precious ornaments help for a period in excess of 3 years is treated as a Long-term capital asset, the items that are help for a period of less than 3 years is treated as a Short-term capital asset.
The calculation of Short-term capital gains in done so that the original cost of purchase of the said item is deducted from the income that is gained through the sale. The calculation of Long-term capital gains is done so that the inflated cost of acquirement through indexation is considered for exemption.
The tax payable for the Long-term gains on income generated through the selling of gold or other precious jewelry can be cut down upon by investing the said amount in a residential house as per Section 54 F of the Income Tax Act of 1961. The same amount invested in Capital Gains bonds such as the bonds of National Highway Authority of India and Rural Electrification Corporation Limited is considered an amount that is tax exempt too.
Every kind of short-term loss can be used to level off short-term capital gains.
Gold is an important asset and the Wealth Tax Act specifies that the precious metal falls in the list of capital assets that are taxable. Bullion, ornaments, utensils, and any other articles made with gold, silver, platinum or any other precious metal in whole or in part, attract tax. However, only if the total net value of these assets is in excess of INR 30 lakh is the Assessee liable for Wealth Tax.
Aashish is an expert on Tax issues and runs Make My returns
He has blogged earlier on DG which can be read here: http://www.daulatguru.com/blog/71-profession-tax-or-tax-on-employment