New Delhi, Aug. 20 -- Selling old gold jewellery can trigger a capital gains tax liability if the asset is sold for more than its cost of acquisition. Some taxpayers may believe that they can reduce or altogether eliminate the requirement to pay tax if they simply use the sale proceeds to buy new gold jewellery.

Since gold is treated as a capital asset by the income tax department, any profit arising from its sale is subject to taxation. Taxpayers must also note that the levy is calculated only on the profit, and not on the full selling amount.

Under Section 2(14) of the Income-tax Act, jewellery is excluded from the definition of "personal effects", with the law specifically including ornaments made of gold, silver, platinum or any oth...