hi one of my friend holds physical gold worth 4-5 lacs, now he wants to convert it to sgb bond, but he is a BPL ration cardholder and he is in fear that if this much transaction happens in his account then some problem can arise for his bpl cardholder status
can anybody of you throw some light on this issue and can give any solution for it
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Hey @PRASAD1
From the income tax point of view, the AO i.e. Assessing Officer may question the source of funds in his account. If he has reported it as an income in the previous years and paid tax on the same, there is nothing to worry. For the BPL cardholder status, you can check with the relevant authority.
You can read about the tax treatment of SGB Bonds here - Sovereign Gold Bond - Taxation on SGB
@Quicko I dont think physical Gold can be converted to SGB directly.
One needs to SELL gold and purchases SGB, then Capital Gains will be a must on the sell part of physical gold.
SGB interest paid twice yearly is also taxable but CG on maturity is exempt, only CG applies to premature sale.
For physical gold, there is GMS-Gold Monetization scheme. ( GMS-2015)
Here gold is melted and appraised and the term is chosen, I heard the short-term plan is not offered by banks. Medium and Long are backed by Govt and are offered.
In GMS, the advantage is “both” the GOLD when redeemed, and the interest is tax exempt.
Disadvantage: Physical jewelry is not returned,
Redemption can be in physical gold ( gold bullion ) and in some cases inr or choice of customer
source:
GMS2015 | Department of Economic Affairs | Ministry of Finance | Government of India (dea.gov.in)
she is my friend and she is married and she got this from her father
so will there be any problem ?? if she coverts it from physical to sgb ??
From same source
Further, as per CBDT instructions No. 1916 dated 11th May, 1994 in course of IT Search u/s 132, gold jewellery to the extent of 500 gms per married lady, 250 gms per unmarried lady and 100 gms per male member of the family, need not be seized by the authorities, but the tax penalties, as applicable will be levied.
CA can explain how one can prove source of inherited gold.
but in other words it means upto 500gm based on other factors is not a red-flag in most cases.
Income Tax provisions shall apply based on the nature of the transaction. Capital Gains will arise on sale of physical gold or on conversion to SGB. Both of these are considered as transfer of capital asset and thus capital gains will arise. Such capital gain would be taxable at 20% with indexation benefit since it is a long term capital asset. You can read more about taxation on gold here
Hey @PRASAD1
Gold received as inheritance from a relative (includes father) is exempt from tax when you receive it. However, you’ll have to pay tax when you transfer or convert or sell it. It is taxable as capital gains.
Read more about tax on inherited gold here