Dhanteras, a Hindu festival, is considered the most auspicious day in the year to buy gold and it falls on October 25 (subject to change) this year. Diwali, which falls a day later, also marks an auspicious time for gold purchase for Indians who observe the festival. In a large section of Indian families, there is an age-old practice of buying gold ornaments on Dhanteras.

The family jewels are kept in the form of gold and other jewellery and this includes ancestral jewellery as well. However, CBDT (Central Board of Direct Taxes) has dispelled such speculation and it has been decided that the jewellery/gold purchased out of declared income or out of exempted income (e.g. agricultural income) will not be considered as chargeable, both under the existing provisions as well as under the proposed amendments.

Further, any jewellery/gold that is inherited (i.e. ancestral) and has been acquired under-explained/declared sources or even purchased through regular and reasonable household savings is exempt from taxation. This directly implies that legal and legitimate holding of gold up to any extent is protected from taxation.

The Income Tax department officials conduct raids/search operations to investigate and recover the assets and with this in mind, it has been declared that during such raids/search operations, there will be no seizure of gold ornaments/jewellery to the extent of 500 grams per married woman, 250 grams per unmarried woman and 100 grams per male member of the family.

Coming as a sign of protection for the declared and legitimate gold and jewellery assets of any family, this is a very positive development for financial strength

So, if you are planning to buy gold this year, keep in mind these following things in order to make most of your investment:

Know the purity level: The purity of gold is denoted in karats, with 24 karat gold being 99.9% pure and 22 karat gold being 92% pure. Always be cautious of purity before buying the Gold.

Buy hallmarked jewellery: To be safe, it is advisable to purchase hallmarked jewellery. The process of certifying the purity of gold called is called hallmarking.

Always take a Bill: It is estimated that India imports 700-800 tonne of gold annually, out of which almost 30 is smuggled (mainly through Dubai). This gold comes under the unorganized sector. GST has spiked the gold rates by 13%, which may increase the chance of smuggled gold making its way to the Indian shores, more than usual. Thus, always be ready to share your PAN card to the jeweller and always ask was proper GST Paid Tax or Retail Invoice.

Know the exact gold prices: Gold Prices are transient in nature and fluctuate on a daily basis, thus its advisable to look at Bullion Price and then to check the discounting based on purity. Earlier, the tax on gold was 1% service tax and 1% VAT, amounting to 2%. GST has hiked the tax rate of gold to 3%. This is in addition to 10% Import duty on Gold. GST on cut and polished semi-precious stones has been reduced from 3% to 0.25%.

Making charges: Making charges are labour charges which are based on weight and gold rates. This is a room where the customer can bargain with medium level jewellers.

Precious stones in jewellery: Precious stones like diamond and emerald are often added to gold jewellery. It our duty to ensure that the weight of precious stones are not added to the weight of gold. So, keep this in mind while purchasing studded jewellery. GST on cut and polished semi-precious stones has been reduced from 3% to 0.25%

Exchange of Old Ornaments -: Ensure that the certificate is obtained for weight and purity of the old ornaments offered by you in exchange. The same must be adjusted in the Bill or the payment of the same must be obtained through Cheque. In no case, the cash should be encouraged for the purchase and sale of Gold. If the cumulative period you and your mother or grandmother held the jewellery exceeds 24 months, the gains arising from the sale are taxable as LTCG, taxed at the rate of 20%.

Happy Glittering Dhanteras 2019!!


By Rakesh Nath Srivastava

Graduate from SRCC, Delhi and a Chartered Accountant, Rakesh has over 22 years of experience in Taxation, Audit and Estate Planning. His stronghold is taxation and estate planning through WILLs and Trusts.

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