Bought any gold lately? Here’s why you should save the receipt!

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Bought any gold lately_ Here’s why you should save the receipt!

With the festive season in full swing, it is not uncommon to find Indians purchasing gold. Do we even need a reason for gold shopping? Gold has been a part of Indian culture since time immemorial and we use it to adorn ourselves on nearly every special occasion. Turns out, gold has more uses than just as an ornament. Invoices for gold purchases, whether jewelry or bullion, can be used as proof of investment with your taxable income. How’s that for a tax saver?

There is no limit to the amount of gold an individual can possess or gold investments you can make as long as you can provide an explanation for the source of investment or inheritance, as per a circular dated December 1, 2016 by the Central Board of Direct Taxes (CBDT). Any gold that you purchase or possess should have a disclosed source of income, otherwise income tax officials can confiscate it.

As per instructions from the CBDT, officials cannot seize gold ornaments and jewelry up to 500 grams from married women and 250 grams from unmarried women. Male members of the family are allowed to posses 100 grams of gold before officials conduct an inquiry. There is no reason to worry when purchasing gold with your taxable income. You can purchase ornaments, bars of gold coins using a credit/debit card or cash as long as your source of income has been disclosed, but it would be a wise idea to maintain the receipts even if you exchange the jewelry. If you earn Rs 50 lakh+ from any source of income, then you are required to declare the amount of gold you possess under assets- liabilities schedule when filing your income tax return.

Gold Inheritance

If you have inherited gold, you may either disclose the original price paid by the buyer and in case you do not have the details, you can disclose the market value of the gold as on April 1, 2001. If no documented evidence is available, income tax officials can also choose to validate the source of gold by giving consideration to family traditions and social status.

Taxation on Sale of Gold

There are certain tax implications on the profit made on the sale of gold asset known as capital gains and these implications are liable as short-term or long-term capital gains tax. Short-term capital gains tax will be applicable for gold held for less than three years. The entire gain is added to your income and taxes as per your slab will be applied. If gold has been held for more than three years, long term capital gains will be applicable where the profit on sale of gold will be taxed at 20% after indexation. Receipts of gold purchases will aid tax officials in verification when computing the gain or loss on sale of gold assets.

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