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Advice by CA Niyati Shah, Vertical Head – Personal Tax at 1 Finance
When you inherit, there’s relief – and then there’s homework. Inheritance itself is not taxed in India. The real story begins only when you sell. That’s where most legal heirs get caught off guard.
1. It’s not income – until you sell
Receiving inherited gold is not a taxable event, however, the gold jewellery worth ~₹50 lakh becomes your capital asset. The Income Tax Act treats the transfer as inheritance, not income. Tax arises only when you (the heir) sell it: the sale is treated as a transfer of a capital asset and attracts capital gains tax in your hands.
2. The 24-month rule – time defines tax
The Finance (No. 2) Act, 2024 (effective from 23rd July, 2024) updated the rules of capital gains.
> Short-term gains: If the holding period (including your relative’s ownership) is ≤ 24 months, gains are taxed at your slab rates.
> Long-term gains: If held > 24 months, gains are taxed at a flat 12.5%, without indexation benefit.
3. Cost of acquisition – the 2001 lifeline
If your relative purchased the jewellery before 1st April, 2001, you can adopt the higher of:
> The actual cost or
> The fair market value (FMV) as on 1st April, 2001.
With gold prices being modest then, this cushions your tax outgo. A registered valuer’s certificate can be worth its weight in gold – literally.
4. Can Section 54F help you save tax?
Yes. Sell long-term jewellery, reinvest the entire sale proceeds (not just gains) in a residential house in India within the stipulated window (2 years for purchase, 3 years for construction), and your gains can escape tax by claiming full exemption.
Pro tip: park money in a Capital Gains Account Scheme before filing your Income Tax Return, if you need time to scout for the right property and preserve your exemption window.
However, please note, you should not already own more than one residential house (other than the new one) on the date of investment.
5. Paperwork – your best armour
The tax department often scrutinises inherited assets on cost, date, and ownership. Documenting well saves stress and money. Here’s a checklist:
Why documents matter
Proper documentation is essential when dealing with inherited gold to establish ownership, verify cost, and claim tax exemptions. Key documents include the Will, death certificate, legal heir or succession certificate, and probates to prove inheritance and ownership. Original purchase invoices or payment proofs help establish the cost basis, while a registered valuer’s FMV certificate as of 1st April 2001 allows you to claim the cost substitution benefit. Hallmark or purity certificates, photographs, and repair bills verify the asset’s identity and any improvements made.
Sale invoices and payment receipts substantiate the sale value, and bank proofs of reinvestment or deposits in a Capital Gains Account Scheme (CGAS) are needed to claim exemptions under Section 54F. Additionally, TDS certificates and Form 26AS help claim credit for any tax deducted by the buyer. These records should be maintained for at least eight years after filing the return, and longer if litigation is possible.
6. Other taxes & compliances
● TDS (Section 194Q): A jeweller with a turnover >₹10 crore buys jewellery worth over ₹50 lakh from you in a year, they must deduct 0.1% TDS on the excess. This will reflect in your Form 26AS and is creditable.
● GST: Not applicable on your personal sale of jewellery; the dealer handles GST.
● Cess and surcharge: 4% cess and applicable surcharge (based on your income level) are added to the capital gains tax.
Conclusion:
Inheriting gold may feel like a windfall, but tax law treats it with precision. The relief is that inheritance itself is tax-free. The responsibility is that when you monetise it, classification, documentation, and reinvestment choices decide whether it remains a blessing or becomes a burden. Treat your heirloom with tax wisdom, and it will shine just as brightly in your balance sheet as in your jewellery box.
