PLANNING to sell that meenakari choker that grandma gave you? The taxman could knock for his share. wealth gives reader Yogesh some tips.
I received gold ornaments from my ancestor 15 years back. Now I want to sell them. Since I do not know the cost at which they were bought, do I have to pay capital gains tax? If yes, what is the tax rate?
-- Yogesh
1. Yes, you will need to pay capital gains tax.
2. For the tax rate, see if the asset (gold in this case) is long term or short term.
Long or short
Gold ornaments held for a period of more than 36 months are long term capital assets and attract long term capital gains (LTCG) tax. If held for less than 36 months, then they are short term capital assets and attract short term capital gains (STCG) tax.
Since you inherited the jewellery 15 years back, LTCG tax is applicable.
How to calculate
| LTCG tax = (Sale price of ornaments – Indexed cost of acquisition) x 20 per cent |
What is indexed cost of acquisition?
The tax laws allow you to take the benefit of rising prices or inflation. That is, your original purchase price will be adjusted to current prices. That way, your inflation adjusted gains will be lower than the absolute gains.
You can calculate inflation adjusted purchase price by using the formula:
| Indexed cost of acquisition = Actual purchase cost x (CII for the year of sale/ CII for the year of purchase) |
Purchase cost for inherited assets
| Date and cost of purchase for previous owner = Date and cost of purchase for you |
For example, if your ancestor had bought the ornaments on 14th August, 1975 for Rs 50,000, then, when you sell these ornaments, the date of purchase would be taken as 14th August, 1975 and the cost would be taken as Rs 50,000.
Smart tip: In case your ancestor had bought the ornaments before 1st April, 1981, then the cost of ornaments will be the fair market value (FMV) as on 1st April, 1981. You can obtain the FMV from a government approved valuer. Find out if your jeweller is an authorized valuer.
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