Section 54F: Avoid capital gains tax on jewellery sale with house buy

The house purchase must be via registered sale deed and within specified time limit

- BINDISHA SARANG

The Bengaluru Bench of the Income Tax Appellate Tribunal (ITAT) recently granted an exemption from long-term capital gains (LTCG) on the sale of inherited jewellery. This decision came after an assessing officer (AO) earlier denied the benefit under Section 54F of the Income-Tax Act, 1961, which permits taxpayers to claim an exemption on LTCG from the sale of capital assets other than a house property. "If a taxpayer sells assets such as stocks, bonds, jewellery, or gold for a profit (long-term capital gains), they can avoid paying taxes on that profit by using the proceeds to purchase a new house," says Akarsh Garg, partner, Trilegal Associates.

The verdict

The ITAT affirmed that the exemption under Section 54F applies to capital gains from the sale of inherited gold and jewellery, provided the gains are reinvested in purchasing a residential house through a registered sale deed.

"The Income-Tax (I-T) Department had challenged the veracity of the transaction involving the sale of inherited gold, questioning whether the assessee actually possessed such gold and labelling the entire transaction as a sham," says Garg from Trilegal Associates.