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Thursday, 26 August 2021

Profits from the sale of property and gold are also taxable, tax is calculated based on the duration of the investment.

 Profits from the sale of property and gold are also taxable, tax is calculated based on the duration of the investment.



The last date for filing Income Tax Return (ITR) for the financial year 2020-21 is September 30. Accurate information of all income and capital gains is required at the time of filing ITR. When you sell a property or gold, you have to pay tax on the capital gain received from it. If you do not pay taxes it will be considered tax evasion. CA Abhay Sharma is telling you how much tax you have to pay on capital gains earned from selling property or gold.


How much tax on what type of gold?


Physical Gold

Physical gold includes jewelry and other gold items along with coins. Short term capital gain is considered if you have sold gold within 3 years. Profits from these sales are taxed according to your income tax slab. Also, if you sell gold after 3 years, it is considered a long term capital gain. It has to pay 20.8% tax.


Gold Mutual Fund or Gold ETF

Profits from gold ETFs and gold mutual funds are taxed in the same way as physical gold. There is no separate rule of income tax.


Sovereign Gold Bond

The maturity period of the bond is 8 years. But investors get a chance to exit after 5 years. This means that if you want to invest money in this scheme, you can withdraw money after 5 years. If you exit before the redemption window (5 years after opening) or through the secondary market, the capital gains tax levied on physical gold or gold mutual funds or gold ETFs will apply.


Gold bonds pay interest at the rate of 2.50% and this interest is fully taxable according to your tax slab. As well as the capital gain received from it on completion of 8 years is completely tax free.


How much tax do I have to pay on selling the property?

According to the Income Tax Act, if the property is sold within 2 years of purchase, the profit is considered short term capital gain (STCG). This amount of profit from the sale of a house or plot will be added to your total income and then taxed according to your tax slab.


If you keep the property for 2 years after buying it and then sell it, the profit from it will be considered as Long Term Capital Gain (LTCG). On this type of income you will have to pay tax at the rate of 20.8% after the benefit of indexation (increase in the value of the property over time).


Residential house property has the benefit of tax deduction

Under the Income Tax Act, capital gains from the sale of a home are also taxable. But under section 54 of the Income-tax Act, if a person buys another house out of this amount within the stipulated time, the amount invested in the new house is less than the taxable capital gain. A new residential house property is purchased or a building is constructed for a Section 54 exemption.

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What is capital gain?

Suppose, a few years ago you invested Rs 1 lakh in a property or gold which has increased to Rs 2 lakh, then Rs 1 lakh will be considered as capital gain. Only then will you be taxed.

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