Selling gold after price rise: Have you factored in capital gains tax you will have to pay? Know how you will be taxed on selling Rs 10 lakh worth of gold
When selling old gold jewellery, be aware that it comes with capital gains tax and Goods and Services Tax implications. Long-term capital gains tax is set at twelve point five percent, while short-term gains are taxed according to your income tax ...
By Shaghil Bilali, ET Online | Updated:
ET Online
When gold prices rise, you may consider selling your old gold jewellery to buy new jewellery. Since gold has delivered good returns in the last few years, you may earn a substantial capital gain on selling your old gold jewellery. But even if you plan to buy new jewellery immediately with the money you get from selling your old gold jewellery, you must pay capital gains tax first. The capital gains tax will depend on the holding period and purchase and selling costs. Not just that, when you buy the new jewellery, you will also have to pay Goods and Services Tax (GST) along with making charges.
Capital gains tax, GST and making charges may eat out a significant portion of your gains from old jewellery. An expert calculation shows that on a sale of old jewellery worth Rs 10 lakh, where the holding period is more than 24 months, the approximate capital gains tax can be Rs 1.05 lakh, while on a Rs 1 crore sale value, the capital gains tax can be as high as Rs 10.50 lakh.
What are the capital gains tax rules on the sale of gold jewellery?
Explaining capital gains tax rules on sale of gold jewellery, chartered accountant Abhishek Soni, CEO & co-founder, Tax2win, says, “If gold jewellery has been held for more than 24 months, the profit is treated as long-term capital gain (LTCG) and is currently taxed at 12.5%, without indexation. If it is sold within 24 months, the gain is treated as short-term capital gain and is taxed at the applicable income-tax slab rate.
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Soni further says gold jewellery’s tax calculation depends on the original purchase cost and the date of purchase, not just the current value of the old gold. “So, a sale of gold worth Rs 10 lakh does not automatically mean tax is payable on the entire Rs 10 lakh,” says Soni.
How your capital gains on sale of old gold jewellery can be taxed
Let’s understand it with an example of the spot gold return on the Multi Commodity Exchange of India. In 10 years, spot gold has given a Compound Annual Growth Rate (CAGR) of 17.16%.
Though 10-year gold jewellery returns may vary, if we assume the same return, the value of a Rs 1 lakh investment in jewellery made 10 years ago would be approximately Rs 4.88 lakh in current times, where LTCG will be Rs 3.88 lakh. The seller needs to pay LTCG at 12.5% on this amount.
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How much tax you may need to pay if you sell old jewellery worth Rs 10 lakh-Rs 1 crore
Soni, in his calculations for gold taxation on old jewellery, where the holding period is more than two years, shows that on sale values of Rs 10 lakh-Rs 1 crore, the total tax will be around Rs 10.50% of the sale value. For example, if you sell old jewellery worth Rs 25 lakh, you may need to pay approximately Rs 2.62 lakh in long-term capital gains tax.
Source: Abhishek Soni, Tax2Win
In the table, you can see how your gains from the sale of old gold jewellery will be taxed at different stages and how the final new gold value can be significantly lower than the sale value of old gold jewellery.
So, if you want to sell your old jewellery and buy new, you need to calculate tax and see if it is worthwhile.
MCX spot gold rates of last 10 years
Source: MCX
Capital gains tax, GST and making charges may eat out a significant portion of your gains from old jewellery. An expert calculation shows that on a sale of old jewellery worth Rs 10 lakh, where the holding period is more than 24 months, the approximate capital gains tax can be Rs 1.05 lakh, while on a Rs 1 crore sale value, the capital gains tax can be as high as Rs 10.50 lakh.
What are the capital gains tax rules on the sale of gold jewellery?
Explaining capital gains tax rules on sale of gold jewellery, chartered accountant Abhishek Soni, CEO & co-founder, Tax2win, says, “If gold jewellery has been held for more than 24 months, the profit is treated as long-term capital gain (LTCG) and is currently taxed at 12.5%, without indexation. If it is sold within 24 months, the gain is treated as short-term capital gain and is taxed at the applicable income-tax slab rate.
Also Read: 8th Pay Commission news: Pensioners' body in Chennai recommends 3.83 fitment factor; but can 8th CPC deliver it?
Soni further says gold jewellery’s tax calculation depends on the original purchase cost and the date of purchase, not just the current value of the old gold. “So, a sale of gold worth Rs 10 lakh does not automatically mean tax is payable on the entire Rs 10 lakh,” says Soni.
How your capital gains on sale of old gold jewellery can be taxed
Let’s understand it with an example of the spot gold return on the Multi Commodity Exchange of India. In 10 years, spot gold has given a Compound Annual Growth Rate (CAGR) of 17.16%.
Though 10-year gold jewellery returns may vary, if we assume the same return, the value of a Rs 1 lakh investment in jewellery made 10 years ago would be approximately Rs 4.88 lakh in current times, where LTCG will be Rs 3.88 lakh. The seller needs to pay LTCG at 12.5% on this amount.
Also Read: 8th Pay Commission: How basic salary of Level 6 employees may double in 7 years after DA merger?
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How much tax you may need to pay if you sell old jewellery worth Rs 10 lakh-Rs 1 crore
Soni, in his calculations for gold taxation on old jewellery, where the holding period is more than two years, shows that on sale values of Rs 10 lakh-Rs 1 crore, the total tax will be around Rs 10.50% of the sale value. For example, if you sell old jewellery worth Rs 25 lakh, you may need to pay approximately Rs 2.62 lakh in long-term capital gains tax.
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| Sale Value | ₹ 10,00,000 | ₹ 25,00,000 | ₹ 50,00,000 | ₹ 75,00,000 | ₹ 1,00,00,000 |
| LTCG | ₹ 6,00,000 | ₹ 15,00,000 | ₹ 30,00,000 | ₹ 45,00,000 | ₹ 60,00,000 |
| LTCG Tax (12.5% + 4% cess) | ₹ 78,000 | ₹ 1,95,000 | ₹ 3,90,000 | ₹ 5,85,000 | ₹ 7,80,000 |
| Net Proceeds | ₹ 9,22,000 | ₹ 23,05,000 | ₹ 46,10,000 | ₹ 69,15,000 | ₹ 92,20,000 |
| GST @ 3% | ₹ 26,854 | ₹ 67,136 | ₹ 1,34,272 | ₹ 2,01,408 | ₹ 2,68,544 |
| Final New Gold Value | ₹ 8,95,146 | ₹ 22,37,864 | ₹ 44,75,728 | ₹ 67,13,592 | ₹ 89,51,456 |
| Total Tax | ₹ 1,04,854 | ₹ 2,62,136 | ₹ 5,24,272 | ₹ 7,86,408 | ₹ 10,48,544 |
In the table, you can see how your gains from the sale of old gold jewellery will be taxed at different stages and how the final new gold value can be significantly lower than the sale value of old gold jewellery.
So, if you want to sell your old jewellery and buy new, you need to calculate tax and see if it is worthwhile.
MCX spot gold rates of last 10 years
| Date | Gold Rate (₹/10g) | Rate up/down per year | CAGR since 2016 |
| Sep 8, 2016 | ₹ 31,240 | — | |
| Sep 8, 2017 | ₹ 30,388 | ₹ -852 | -2.73% |
| Sep 7, 2018 | ₹ 30,402 | ₹ 14 | -1.35% |
| Sep 9, 2019 | ₹ 38,254 | ₹ 7,852 | 6.98% |
| Sep 8, 2020 | ₹ 50,967 | ₹ 12,713 | 13.02% |
| Sep 8, 2021 | ₹ 47,003 | ₹ -3,964 | 8.51% |
| Sep 8, 2022 | ₹ 50,679 | ₹ 3,676 | 8.40% |
| Sep 8, 2023 | ₹ 58,937 | ₹ 8,258 | 9.49% |
| Sep 9, 2024 | ₹ 71,059 | ₹ 12,122 | 10.82% |
| Sep 8, 2025 | ₹ 1,07,595 | ₹ 36,536 | 14.73% |
| Sep 8, 2026 | ₹ 1,52,265 | ₹ 44,670 | 17.16% |
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