Many Indian households sell old gold jewellery to a local jeweller without realising that the profit may be taxable. Under Indian tax laws, gold is treated as a capital asset, so any gains from its sale must be reported in the income tax return.
Under the law, the tax treatment of selling gold depends on how long you hold it. Physical gold generally qualifies as a long-term capital asset after more than 24 months.
Short-term (held 24 months or less): The gain is added to your income and taxed at your slab rate.
Long-term (held more than 24 months): The gain is taxed at 12.5% plus 4% cess, without indexation (for transfers on or after July 23, 2024).
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If you did not purchase the gold yourself, but it was inheritance, you need to figure out the cost of holding based on the previous owner. Their holding period can be carried and added to yours to compute the tax liability.
If you are unable to establish the original cost of the gold, you can use the fair market value as on April 1, 2001, where applicable.
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Here is an instance, a person bought jewellery in 2020 for Rs 2,00,000 and sold it to a jeweller in October 2026 for Rs 6,00,000.
In this case, the holding period: over 24 months, so it is long-term.
Capital gain: Rs 6,00,000 − Rs 2,00,000 = Rs 4,00,000
Tax at 12.5%: Rs 50,000
Cess at 4%: Rs 2,000
Total tax liability: Rs 52,000
This means you need to report the gain in your ITR for the specific financial year and pay Rs 52,000 in taxes.
How To Report Sale of Physical Gold?
If you have gains from selling gold, you cannot use ITR form 1 to file your returns. You will need to use ITR-2 form to report the gain. It is recommended to keep documents such as purchase invoice, sale receipts and bank statements for this purpose.
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In ITR-2 or 3 (if you have business income), you will find the “Schedule CG” section. There, you need to select the asset and report the gain with relevant documents.
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