No purchase bill for inherited gold? Here's how to calculate tax
Suppose you are rummaging through your old almirah and stumble upon a couple of pieces of jewellery your grandmother gifted you when you were a child. You need money for an important expense and decide to sell one of them. You know that gifts received from specified relatives, such as parents, grandparents or spouses, are tax-free at the time of receipt. But will the capital gains from selling the jewellery also be tax-free? Not really.
The tax liability will depend on the cost of acquisition, the holding period and the sale price. The date you inherited or received the jewellery as a gift will not determine the tax treatment on its own. The previous owner’s cost of acquisition and holding period, along with the date of sale, will come into the picture.
“In the case of inherited gold, the previous owner's holding period is included when determining whether the asset qualifies as long-term. It does not matter when the seller became the owner of the asset,” said CA Ashish Karundia.
Finding the cost
This brings up another challenge: how do you establish the previous owner’s cost of acquisition? Since the jewellery may be decades old, you may not have the original purchase bill. What can you do in such a situation?
“The absence of the original purchase bill does not mean that the entire sale value becomes taxable. If it is unavailable, one can use other evidence, such as valuation reports, jeweller records or other documents, to substantiate the cost,” said Karundia.
You could approach the original jeweller, if identifiable, or a valuation professional to establish the acquisition cost. However, if the jewellery was acquired before 1 April 2001, you may opt to use its fair market value (FMV) as on that date instead of its actual cost of acquisition.
“For gold acquired before 1 April 2001, the fair market value as on that date can be considered,” said Karundia.
How much tax will you pay?
Physical gold is treated as a capital asset. For gold sold on or after 23 July 2024, it qualifies as a long-term capital asset if the holding period exceeds 24 months. Long-term capital gains are taxed at 12.5% without indexation, while short-term capital gains are taxed at the applicable income-tax slab rate.
The taxable capital gain can be reduced by deducting the eligible cost of acquisition and qualifying expenses incurred wholly and exclusively in connection with the sale.
“There is no specific capital gains exemption merely because the gold is inherited or constitutes family jewellery. However, eligible transfer-related expenses, such as a commission paid to an intermediary for arranging the sale, can be deducted while calculating capital gains,” said Karundia.
Suppose you sell inherited jewellery in 2026 for ₹15 lakh. You establish that your grandmother acquired it before 1 April 2001 and opt to use its FMV on that date, which is ₹1.5 lakh. You also pay a commission of ₹15,000 to an intermediary who facilitates the sale.
To calculate your long-term capital gain, deduct the eligible cost of acquisition of ₹1.5 lakh and the sales commission of ₹15,000 from the sale proceeds of ₹15 lakh. This brings the taxable capital gain to ₹13.35 lakh.
At the applicable long-term capital gains tax rate of 12.5%, the tax liability works out to ₹1,66,875. Add health and education cess of 4%, amounting to ₹6,675, and the total tax payable comes to ₹1,73,550, or approximately ₹1.74 lakh.
Can you claim an exemption?
Individuals selling gold at a long-term capital gain may also explore the exemption under Section 54F of the Income-tax Act, 1961 (Section 86 under the Income-tax Act, 2025), subject to the applicable provisions and conditions.
“The exemption may be available if the net sale consideration is invested in a residential house in India within the prescribed timelines and other eligibility requirements are met,” said Karundia.