Selling old gold in India: how the buyback price is worked out, and the tax

Old gold often sits in a locker for years. When you finally sell or exchange it, the price can surprise you, usually on the low side. That’s not always a trick. A jeweller pays for the gold inside the piece, not for what you paid at the counter.

How the buyback price is worked out

The sum is simple, in three parts:

1. Weight. The net weight of gold, after removing stones, lac or other fillings.
2. Purity. The actual fineness, for example 916 for 22 carat, as tested.
3. Rate. The jeweller’s buying rate for that purity today.

Weight × purity rate gives the gold value. Then a deduction comes off, for melting loss, impurities or the jeweller’s margin. There’s no fixed rule on the size of this deduction, so ask for it in writing.

What you don’t get back: the making charges and the GST you paid when you bought it. If you paid 12% making charges on a necklace, that money is gone.

An illustration: selling a 22 carat necklace

Made-up numbers. Say the 24 carat (999) rate is 1,30,000 rupees per 10 grams, and the jeweller deducts an assumed 3%. Neither is today’s figure.

• 22 carat rate: 1,30,000 × 0.916 = 1,19,080 rupees per 10 grams.
• A 20 gram necklace that tests at 916: 2 × 1,19,080 = 2,38,160 rupees of gold.
• Less the assumed 3% deduction (7,145 rupees): about 2,31,015 rupees paid to you.

That amount is above 2 lakh rupees, so it can’t legally be paid to you in cash. More on that below.

Purity testing: what happens at the counter

Many jewellers test with an XRF (X-ray fluorescence) machine, sometimes called a karatmeter. BIS’s own guidelines note that XRF is non-destructive but reads only the surface, so it may not show the average purity of the whole piece. The accurate method, per BIS, is fire assay, which removes and melts a small sample.

For an independent reading, you can take jewellery to any BIS-recognised Assaying and Hallmarking Centre, which tests it for a fee and gives a report.

Why a hallmark with HUID helps

A hallmark with a six-character HUID states the purity, and you can check it in the BIS CARE app. Read how to check a hallmark and HUID. It doesn’t fix the price, but it narrows the argument about purity.

Mandatory hallmarking applies to gold jewellery sold by jewellers in notified districts: 392 districts after the eighth phase, dated 3 August 2026, per BIS. It doesn’t stop you selling old pieces. BIS says consumers can sell old hallmarked or unhallmarked jewellery to jewellers.

Did you know? If a hallmarked piece is retested and found less pure than its mark, BIS rules entitle the buyer to compensation of twice the value of the purity shortfall, plus the testing charges.

Exchange or cash sale?

• Exchange. The old gold value is set off against a new piece. Deductions are often smaller, but the new piece carries fresh making charges and 3% GST.
• Sale. You walk away with money. Compare offers from two or three jewellers.

The 2 lakh rupee cash limit

Under section 186 of the Income-tax Act, 2025, no one may receive 2 lakh rupees or more from one person in a day, for one transaction, or for one event, except by account payee cheque, bank draft or an electronic bank mode. When you sell gold, you are the receiver. Section 451 lets the tax officer impose a penalty equal to the amount received. Take large sums by bank transfer.

Tax on the gain

Gold jewellery is a capital asset, and selling or exchanging it is a transfer. Your capital gain is the sale value minus what you originally paid.

• Held more than 24 months: a long-term capital gain, taxed at 12.5% with no indexation.
• Held 24 months or less: a short-term gain, added to your income at your slab rate.

Continuing the illustration: if you’d bought that necklace for 1,20,000 rupees four years earlier, the gain is about 1,11,015 rupees, and tax at 12.5% is about 13,877 rupees before cess. For inherited jewellery, the previous owner’s cost and holding period count. Keep old bills. See tax on gifts for jewellery received as a gift.

The takeaway. You’re paid for the pure gold, at today’s rate for its real purity, minus a deduction. Get the test done in front of you, ask for the deduction in writing, take large sums by bank, and keep your bills for tax. If gold for you is an investment rather than an ornament, the routes compared in gold ETF vs gold fund skip making charges altogether.

More to read: why India’s gold price differs from the world price, how to invest in silver, the real cost of a gold loan, and gold as an investment.