Gold inheritance

Dear SIr,

Hope you are doing well !!

Where a capital asset has been inherited, the period of holding of the capital asset by the previous owner also needs to be taken into consideration in computing the number of years of holding. 

In that case, any gains arising from this (sale consideration less indexed cost of acquisition and improvement) will be taxable as a long-term capital gain (LTCG).

Further, as this is an inherited asset, the cost of the jewellery for her would be the cost at which the jewellery was acquired other than by inheritance.

IF such date of acquisition falls prior to 1 April 2001, she has a choice to consider the Fair Market Value (FMV) of the gold as on 1 April 2001 as her cost. 

So, firstly she needs to get the valuation report of gold on 01.04.2001.

Government-approved valuers follow a standard process for the valuation and provide a detailed report.

“Assumptions of any type for consideration of value shall not be entertained by the income tax department. In case of any enquiry, the department will consider the value stated in the valuation report from a registered valuer,"

Amount of capital gain would depend upon sale price, sale date, purchase price and purchase date by your ancestors.

Exemption from long term capital gains

She can claim an exemption from LTCG, under section 54F of the income-tax Act if the LTCG is reinvested in a new residential property located in India within the specified time frames. Where the new property is purchased, the gain is required to be reinvested either within 1 year prior to sale date or 2 years after the sale date. Where the new property is constructed, the time period prescribed for the reinvestment is within 3 years from the date of sale of the original asset.

Alternatively and/or additionally, she can invest the capital gains of up to Rs 50 lakhs in bonds of NHAI or REC, within six months of its accrual and get the exemption u/s 54EC. Such bonds shall be redeemable after 5 years. Only interest received on such bonds shall be taxable. There would be no taxes on redemption after 5 years.

We may assist you in capital gain tax calculation, property valuation and entire procedure.

It is advisable to take a phone consultation for detailed discussion. 

As per section 56, gift received from lineal ascendant and descendent is exempt. Hence no tax liability.

There is no debar to sell the gold, but its advisable that instead of selling you can take gold loan. 

Hello,

Inheritance of gold from your grandmother to your mother would be exempt from tax.

On the sale of such inherited gold, capital gain would be applicable. 

In the case of inheritance period of holding of both your grandmother and mother would be considered to determine whether Long Term or Short Term Capital Gain would be applicable. If the period of holding is more than 3 Years, LTCG would be applicable taxable at flat 20%, otherwise, if the period of holding is less than 3 Years, STCG would be applicable taxable at slab rates.

To calculate the capital gains, you need to determine the cost of acquisition. The cost of acquisition in the case of inherited gold is the cost of acquisition to the person from whom it has been inherited. Also, in case LTCG is applicable if the person from whom such gold is inherited had originally purchased the gold before 1 April 2001, there is an option to consider the fair market value (FMV) as on 1 April 2001, instead of the actual cost of the said gold.

I hope this answer satisfies your requirements. It would be advisable to take a phone consultation for better resolution.

Regards,

CA Hunny Badlani

Hi

 No income tax is levied on inheritance of gold but subsequent sale of the inherited gold is taxable.

Hi,

Assuming that tou would not have the cost if acquisition of gold by your grandmother, You can take fair market value if the gold as on 1.4.2001. Since, the gold price as on 1.4.2001 is readily available on the internet, there should not be any issues from the tax department also. Capital gain will be payable at the time of sale of gold by your mother. It would be sale price minus indexed cost of acquisition of gold (indexed cost would be FMV as on 1.4.2001 multiply by 3.01). 

In order to exempt capital gains under section 54 F, you may opt to invest in a residential house property within 2 years of sale of gold or a residential land and construction of house thereon within 3 years of sale of gold.

There are no other reinvestment based exemptions available in your case

Your mother can show the inherited gold as an exempt income in her return of income.

There are different recommended limits for holding gold. Married woman can have gold of approx. 500 gm. Man can have gold of 100gm. You can very well hold the gold above this limit subject to certain conditions. 

We can discuss the above in detail over a phone. One should create strong documentation around it.

Yes she can sell the gold and she needs to pay capital gain on same.

Does she have some proof of inheritance of how she got this gold or when did her mother purchase such gold.

Your mother is not separately required to show it in her income tax return about such gold receipt.

It will surely be capital gain in both cases.

If you wish to use the amount of sale of gold in paying off mortgage and investing in land it won't save your capital gain tax.

There is no such limit unless you have the proof and source of such income.

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Thank you

Dear sir,