Income Tax: Selling jewellery to buy a house? You can claim exemption on capital gains

• April 29, 2024
• CA Chandan Agarwal's Office

Section 54F of Income Tax (I-T) Act allows taxpayers to claim exemption of capital gains tax by buying residential property from the proceeds of jewellery sale

If you have sold jewellery after holding for three years, you are entitled to pay long term capital gain (LTCG) tax. And if the assets were sold within three years of purchase, you are entitled to pay short-term capital gain tax, which means the gains are added to the tax slab.

Income Tax (I-T) Act 1961 allows taxpayers to claim tax exemption of LTCG under section 54F.  Under this provision, if you have earned gains by selling an asset, you can claim exemption on tax by buying a residential property.

Provisions which taxpayers must be aware of

1. The property must be bought either one year before or two years after the sale of the purchase of jewellery.

2. The property must be constructed within three years of sale of the old asset.

“Taxpayers must be mindful of the fact that they only purchase a residential property and not  just any property. And moreover, it must be bought one year before or two years after the sale of assets on which capital gain accrues,” said CA Chirag Chauhan from Mumbai-based Chauhan & Co.

“Section 54F of the Income Tax Act allows individuals to claim an exemption on long-term capital gains earned from selling long-term capital assets such as jewellery, shares, and other capital assets except for house property if the sale proceeds are reinvested for the purpose of purchasing or constructing a house with some conditions,” said CA Paras Gangwal, Founder of ThetaVega Capital.

“Taxpayers can’t claim this exemption if they have more than one residential property. The maximum cap of claiming exemption is ₹10 crore, which was introduced in Budget 2023, prior to which — there was no such limit,” he added.

Let us summarise the points mentioned above:

1.  If you have sold jewellery after holding for three years, you are entitled to pay capital gains tax at the rate of 20 percent.

2. The income tax can be exempted if the taxpayer buys a residential property with the proceeds of jewellery.

3. It is vital that the property is bought either one year before or two years after the sale of jewellery.

4. Taxpayers can’t claim this exemption if they already have two or more residential properties in their name.

5. Maximum limit of claiming income tax exemption under section 54F is ₹10 crore.

Source: https://www.livemint.com/money/personal-finance/income-tax-selling-jewellery-to-buy-a-house-you-can-claim-exemption-on-capital-gains-gold-silver-metals-11714053485022.html