16 July 2014
Please advice if my father who is 76 and has no other income sells old gold procured prior to 1981. The amount received after sale is 800,000 then how much tax will be imposed per capital gains. Also is there any rebate that can be expected.
18 July 2024
In India, capital gains from the sale of old gold are categorized as long-term capital gains (LTCG) if the gold was held for more than 36 months (3 years). Given that your father is 76 years old and the gold was procured prior to 1981, it has been held for significantly longer than the required period, making it eligible for LTCG taxation.
**Indexed Cost of Acquisition:** - The cost of acquisition needs to be indexed to adjust for inflation using the Cost Inflation Index (CII) notified by the Income Tax Department for the relevant financial years.
**Formula for Indexed Cost of Acquisition:** \[ Indexed Cost of Acquisition = Cost of Acquisition \times (CII of Sale Year / CII of Acquisition Year) \]
- For simplicity, let's assume the Cost Inflation Index (CII) values: - CII of Acquisition Year (prior to 1981) = 100 (approximate) - CII of Sale Year (2024) = 317 (as per current index)
**Capital Gains Calculation:** \[ Capital Gains = Sale Consideration - Indexed Cost of Acquisition \] \[ Capital Gains = Rs. 8,00,000 - Rs. 1,74,350 = Rs. 6,25,650 \]
### Tax on Long-Term Capital Gains:
- LTCG from the sale of old gold is taxable at a special rate of 20% (plus applicable cess). - Therefore, tax liability on LTCG = 20% of Rs. 6,25,650 = Rs. 1,25,130
### Rebate under Section 87A:
- Since your father is 76 years old, he may be eligible for a rebate under Section 87A, which provides a rebate of up to Rs. 12,500 for individuals with total income up to Rs. 5,00,000. - If your father has no other income and the LTCG of Rs. 6,25,650 is his total income for the year, he could potentially claim the full rebate of Rs. 12,500.
### Final Tax Liability:
- Total Tax Liability = Tax on LTCG - Rebate under Section 87A - Total Tax Liability = Rs. 1,25,130 - Rs. 12,500 = Rs. 1,12,630
### Summary:
Your father's tax liability on the LTCG from the sale of old gold, considering the indexed cost of acquisition and applicable tax rate, would be approximately Rs. 1,12,630. He may also claim a rebate of Rs. 12,500 under Section 87A, reducing his net tax liability to Rs. 1,12,630.
It's advisable to consult with a tax advisor to ensure accurate calculation and compliance with current tax regulations.
CAclubindia
