How will NBR calculate tax on gold sales under the proposed rules?

Taxpayers declaring income from the sale of gold, silver, gemstones and other valuable assets may soon face a 15% capital gains tax under proposed changes to the Finance Act.

The National Board of Revenue (NBR) says the measure is intended to prevent the misuse of inflated asset declarations in tax returns.

The tax will be based on the increase in an asset's value between the time it was acquired and sold.

How the tax will be calculated

According to NBR officials, taxpayers must have previously declared the asset in their tax records and specified the year it was acquired.

The tax authority will compare the market value of the asset in the year of acquisition with its market value in the year it is claimed to have been sold.

The difference between the two values will be treated as a capital gain and taxed at 15%.

However, the preferential 15% rate will apply only if the asset has been held for at least five years.

If the asset is sold within five years of acquisition, the income will be taxed under the regular income tax schedule. The highest individual income tax rate currently stands at 30% and is scheduled to rise to 35% in the 2028-29 tax year.

NBR officials say the proposed capital gains tax rate is broadly in line with international practice.

For example, if a taxpayer declared ownership of 30 bhori of gold in 2010, when the market price was around Tk42,000 per bhori, and later claimed Tk20 lakh in income from selling gold, the NBR would estimate how much gold would need to be sold to generate that amount.

At the current market price of about Tk2.22 lakh per bhori, roughly nine bhori of gold would need to be sold to realise Tk20 lakh.

The acquisition value of those nine bhori in 2010 would have been around Tk3.78 lakh.

Subtracting the acquisition value from the sale value leaves a capital gain of approximately Tk16.22 lakh.

Under the proposed rules, the taxpayer would have to pay about Tk2.43 lakh in capital gains tax.