Amid soaring silver prices, investors in India are exploring silver utensils as a potential tax-saving alternative to bars and coins. While profits from selling silver bullion or coins attract short-term (15–20%) or long-term (12.5% post-2024 Budget) capital gains tax, silver utensils used for personal or household purposes may be exempt under the Income Tax Act as "personal effects."
Chartered accountants note that the key factor is "reasonable use." Silver thalis, bowls, and spoons regularly used for dining or puja are generally considered household items and tax-free. However, large stockpiles intended primarily for investment may invite scrutiny, and taxpayers must provide evidence like purchase receipts, photographs, or affidavits confirming usage.
The law distinguishes between jewellery and personal effects, with jewellery—including silver ornaments—even in utensils, remaining taxable. Gifts from close relatives or inherited utensils are usually exempt from tax, though profits from their sale must still align with usage classification. High-value transactions recorded in banking statements can trigger audits if proper documentation is not maintained.
With silver prices hitting a 14-year high—Rs 1.98 lakh per kg in North India and Rs 2 lakh per kg in the South—year-on-year gains have been around 93%, significantly outpacing gold’s 55% rise. Analysts suggest that while silverware offers a potential tax-efficient investment, it must be genuinely used in the household to remain exempt from capital gains tax. Misclassification or misuse could lead to audits and penalties of up to 200% of unpaid taxes.
Investors seeking to capitalize on silver’s rally this Dhanteras are advised to maintain meticulous records and consult tax experts to ensure compliance while maximizing tax-free gains from silver utensils.
