CA Umesh Sharma
Arjuna (Fictional Character): Krishna, Recently lot of gold is found in the world famous temple of Phadmanabhan of Kerela. Old is gold; as well gold is old mean of investment. Many other types of precious metal, stones are there but no other can take the place of gold. Indians are found of Gold; hence let’s explain me about gold and taxation.
Krishna (Fictional Character):Arjuna, in world and particularly in India there is huge turnover of gold. Gold is valuable and precious. Purchasing or having gold serves two purposes, one ornaments of gold are used for wearing and second it is used for investments. The value of gold is ever increasing. As the value of gold is high, taxing system also wanted there pie of gold in the ambit of taxation.
Arjuna: Gold is wealth. So does wealth tax applicable to gold?
Krishna: Arjuna, as per Wealth Tax Act, gold and valuable jewelry comes in the definition of wealth. If personal wealth for e.g. land, vehicle, gold, ornaments, etc. of the individual exceeds Rs. 30 lakh as per the rules mentioned in the act at the March end, then wealth tax @1% is required to be paid. For this calculation, valuation of gold is carried out as per rates of 31st March. Further if the value of gold is more than Rs. 5 Lakh, then he will have to obtain valuation report of the value of gold from a registered valuer.
As per Income Tax Circular the person who does not file wealth tax return and if, there is raid by Income Tax Department; the IT personnel cannot seize 500 gms of gold ornament from married female and 250 gms of gold ornaments from the unmarried female. Further Income Tax Department cannot seize valuables, ornaments disclosed in the Wealth Tax Return. Therefore all wealth tax payers should file wealth tax return regularly.
Arjuna: How much VAT will have to be paid on the sale of gold or gold ornaments?
Krishna: Arjuna, generally transaction of purchase and sale of gold are carried out in cash and many does not account for it. Otherwise, if accounted VAT @ 1% is levied in Maharashtra State. These cash transactions are not good for Indian Economy. Therefore government always puts restrictions on gold purchase.
Arjuna: If gold or gold ornaments, etc. gifted to other then what is its tax treatment?
Krishna: As per Hindu Law, women have right of all the gold ornaments, valuables and other gifts received on the occasion of marriage from her parents side. It is called as “StriDhan.” Gold and ornaments received on the occasion of marriage is not taxable. Further, valuables and gifts received on any other occasion from the relatives should be kept on record as regards when and how they are received i.e. list should be prepared. Don’t forget income tax department may enquire about when and how these valuables were received. If these records are kept properly, then income tax will not be required to be paid. Further gifts of more than Rs. 50,000 received from other than relatives are taxable.
Arjuna: What and when taxpayer will have to give information of gold?
Krishna: Arjuna, while buying and selling gold of more than Rs. 5 Lakh, then copy of PAN card will have to be given to the shop keeper. Further in Income Tax Return if income is more than Rs. 25 Lakh then information of gold and ornaments is required to be given by an Individual.
Arjuna: Krishna, in today’s world handling gold is very risky. Therefore for investment option of “Gold ETF” is used. What is this “ETF” and how taxes are charged on it?
Krishna: Arjuna, “ETF” means “Exchange Traded Funds.” Purchase sale of ETF is carried out through stock market. In this option there is no risk of handling gold. Generally if gold held as assets, is purchased are sold within three years then short term capital gain on the profit is levied at normal rates applicable to individuals and if sold after three years then long term capital gain is levied on the profits @ 20%. However Gold ETF is considered like shares, securities in income tax. It means if Gold ETF is sold after 12 months from the date of purchase then Long term capital gain tax is levied @ 10% on the profits and if it is sold within 12 months then short term capital gain tax @ 15% will be levied on the profits. Therefore many use this option.
Arjuna: What one should learn from this taxation of Gold?
Krishna: Arjuna, in life Gold is a good investment but the one who invests in knowledge is real rich. As value of pure gold is more same is the case of pure knowledge. But today such pure things are rare. As originality of gold is known after heating it similarly, identity of knowledgeable person is understood in trouble only. So create wealth with gold but also create wealth of knowledge. Indian love gold, hence knowledge of its taxation is also must. Once upon a time, India was called as ‘SONE ki Chidiya”, its true if we look at the gold stored in Indian Temples, Palaces, etc.