Silver is the second most common form of investment after gold. Indians are just as fond of silver as they are of gold. Silver is also called as the poor man’s gold. Silver is very affordable when compared to gold and is found in almost every household in India. Since individuals were buying silver as an investment or as an ornament, the taxing system wanted to get a piece of it as well.
The applicable taxes on silver are as follows:
Silver comes under the definition of wealth and the bullion rates on the date of valuation is used to determine the fair market value of silver. If the value of silver does not exceed Rs.5 lakh, then you must submit a statement in Form No. O-8A. If the value of silver is over Rs.5 lakh, then you will have to submit the registered valuer’s report and Form No O-8. The report won’t be binding and the tax assessing officer can determine the fair market value separately. 1% Wealth tax is payable if the net taxable wealth exceeds Rs.30 lakh for the financial year. Wealth tax return must be files on the same day you are filing your income tax return.
1% VAT is charged on the purchase and sale of silver. Government puts restrictions on cash transactions as they are not good for the Economy of India.
Sale of silver will be treated as a capital gain. If you are selling the ornament after having held it for more than 36 months, then it will be treated as a long term capital gain and you can avail the benefit of indexation. The long term capital gain is charged at 15%. If you sell silver that you have held for less than 36 months, then it will be treated as short term capital gain is the short term capital gain is charged at 10%.
Tax free Silver:
Silver that is given as a gift is tax free. But you must keep a record of the gift that you have received to avoid confusion with the Income Tax Department.