Many senior citizens looking to convert family-held gold into real estate wonder whether tax exemptions can be claimed on the resulting capital gains. The answer, according to tax experts, is yes—subject to certain conditions under the Income Tax Act.
A common concern among individuals—especially senior citizens—who have held on to gold jewellery for decades is the tax implication upon its sale. As gold often forms a significant part of inherited or marriage-time wealth, many are now looking to liquidate it for more practical investments like real estate.
The good news is that the Income Tax Act, 1961 provides relief under Section 54F for such cases.
Eligibility for Exemption on Long-Term Capital Gains (LTCG)
Gold jewellery qualifies as a long-term capital asset if held for more than 24 months. Capital gains from the sale of such assets may be exempt under Section 54F, provided the proceeds are invested in a new residential property and specific conditions are met.
Key Conditions for Section 54F Exemption
- Investment Timeline:
- The new residential property must be purchased within 1 year before or 2 years after the sale of gold, or
- Constructed within 3 years from the date of sale.
- Ownership Criteria:
- The taxpayer should not own more than one residential house (other than the new one) at the time of selling the gold.
- The taxpayer must not purchase or construct another residential property (apart from the one intended for exemption) within the specified period.
- Holding Period for New Property:
- The newly acquired house must not be sold or converted into any other asset for a minimum of 3 years. If violated, the earlier exempted capital gain becomes taxable in the year of such transfer or conversion.
How the Exemption is Calculated
The capital gains tax exemption is calculated as:
Exemption = (Capital Gains × Amount Invested in New House) ÷ Net Sale Consideration
Here, Net Sale Consideration refers to the gross sale amount minus expenses incurred during the sale.
If the entire net sale consideration is reinvested, the taxpayer may claim full exemption. However, if only a portion is reinvested, the exemption will be proportional.
Upper Limit on Exemption
As per recent updates, if the investment in the new property exceeds ₹10 crore, the excess amount will not be considered for exemption purposes. This cap ensures that ultra-high-value property investments do not receive unlimited tax benefits.
Expert View
According to CA Dr Suresh Surana, Founder, RSM India, “Senior citizens holding long-term gold assets can avail of Section 54F exemption provided they reinvest in a residential property and comply with all prescribed rules. It’s a valuable provision that allows individuals to restructure their asset base in a tax-efficient manner.”
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