A capital gains is the profit you have made on an investment when you sell the asset for more than what you paid for it, net of certain expenses. You are required to pay a tax on your profit called a capital gains tax. If you made a loss (called a capital loss), the loss can be deducted from any capital gains that you had. If you had no other gains, then to a limited extent you can deduct a capital loss from your ordinary income.

The tax rate on capital gains depends on how long you held the asset. If you held the asset for a year or less, the gain is called short term capital gain and is taxed at ordinary income rates. If you held the asset for more than a year, the gain is called long term capital gain and is taxed at a lower rate, which is designed to encourage investment.

Since, Taxmantra.com in this article giving more emphasis on sale of ancestral gold. Thus, firstly it is important to know that when the gold had been acquired by you. Suppose, your ancestor had bought the ornaments before 1st April, 1981, then the cost of ornaments will be the fair market value (FMV) as on 1st April, 1981.

Note: If you will go through Income Tax Ready Reckoner Gold Rates as on 01/04/1981 is given, Rs.1670/-(for every 10 Grams).

Again, if your ancestor had bought the ornaments on 21st August, 1982 for Rs 50,000, then, when you sell these ornaments, the date of purchase would be taken as 21st August, 1982 and the cost would be taken as Rs 50,000.

Thus, the capital gains calculation will be as follows –

Further, the taxes @ 20 per cent would be applicable on the capital gains as derived above. Also, exemption from tax on this capital gains can be claimed by investing in the method as suggested under the provisions of section 54 of the Income Tax Act, 1961.