I am an individual. I owned watches which I had always used for my personal use. In view of the pandemic and slowdown in business and liquidity tightness, I sold some of the watches and received a total sale consideration of ₹20 lakhs through account payee cheques. Will this amount be taxable while computing income for the financial year 2020-21 relevant to the assessment year 2021-22?
It seems that you have always held the watches for your personal use. Therefore, it falls within the definition of ‘personal effects’ under Section 2(14) of the Income Tax Act. Watches used for personal use are not considered a capital asset and therefore the sale of watches does not result in any taxable capital gain. As such, the entire ₹20 lakhs is not taxable. However, you have to establish that ₹20 lakhs received by you is on account of the sale of watches by way of documentary evidence or confirmation of the purchaser that ₹20 lakhs paid by him is towards the purchase of watches from you. You must also obtain the PAN details of the purchaser as the ITO may like to verify the correctness of the transaction.
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