Do you urgently need to sell the gold your in-laws gave you as a wedding gift? Here’s what you need to know.
In India, gifts are generally not considered personal income. However, if the total value of gifts you receive in a financial year exceeds ₹50,000, you must pay tax on the amount over that limit.
This rule includes wedding gifts from relatives, friends, and other guests. If the total value of all your wedding gifts is less than ₹50,000, you won’t need to pay any tax.
But if it exceeds that amount, it will be classified as ‘Income from other sources,’ which means tax will be applicable on the total value of gifts received.
Should You Pay Tax on Gold Received from Your In-Laws?
Certain exemptions apply to gifts under income tax rules. In particular, gifts received from ‘specified relatives’ are not considered personal income, regardless of their value.
This category includes parents, meaning that gold received from your parents is not counted as your income, and you won’t owe any tax.
However, you must pay tax if you choose to sell the gold. As long as you hold onto the gold ornaments given to you by your parents, no tax is applicable.
However, selling them triggers a tax obligation because the proceeds from the sale are classified as capital gains.
Types of Capital Gains
Capital gains are categorized as short-term or long-term based on the asset’s holding period. Here’s an example to clarify:
If your father purchased gold and gifted it to you, the holding period begins from when he bought it. If you sell the gold within 24 months of that purchase, it is considered a short-term capital gain and will be taxed accordingly. If the holding period exceeds 24 months, it qualifies as long-term capital gains, taxed at a flat rate of 12.5%.
It’s important to note that recent budget changes have eliminated indexation for long-term capital gains, which might benefit taxpayers.
You can now deduct the original purchase price of the gold from the sale proceeds, effectively reducing your tax burden.
Additional Note
If you received gold as a gift before April 1, 2001, you can use its market value from that date as the purchase price, further reducing your long-term capital gains tax.
Final Reminder
The information provided in this article is for your understanding only. It is always advisable to consult with a personal financial expert when making important financial decisions.