According to reports from Mint, profits from selling assets are generally treated as capital gains subject to income tax, but certain personal belongings qualify for tax exemption. The income tax department categorizes these items as 'personal effects' - movable property held by taxpayers for personal or day-to-day use. This specific provision in income tax laws provides exemption for gains made on the sale of personal effects by individuals.
As reported by Mint, personal items exempt from tax include clothing and apparel, furniture, crockery or utensils, and daily use electronics such as mobile phones or laptops. However, jewellery, archaeological collections, drawings, paintings, sculptures or any work of art are not exempt and remain subject to income tax regardless of personal use. The definition of jewellery encompasses ornaments made of silver, gold, platinum, or any precious metal alloy, along with precious and semiprecious stones.
According to Mint, items embellished with precious metal or semiprecious stones, or clothing with precious stones worked into them, attract income tax on proceeds. For example, a gold item purchased for ₹2 lakh and later exchanged for jewellery worth ₹4 lakh would result in a ₹2 lakh taxable gain. Taxpayers must note that while gains on personal effects are not taxable, losses cannot be set off against other capital gains or carried forward. Retaining purchase and sale documents is essential for large transactions.
As reported by Mint, when jewellery is inherited or gifted, the previous owner's cost of acquisition and holding period may be considered when calculating capital gains. This applies to items acquired through inheritance or gift, with the tax calculation based only on the profit rather than the full selling amount. The taxable gain is calculated using the cost basis of the original owner, which can significantly impact the tax liability for the current owner.
