The Government has permitted NRI’s to legally import gold (Maximum 5 kgs. w.e.f. 1-1-97, duty of Rs. 220 per 10 grams increased to Rs. 250 from June, 1998 and Rs. 400 from 5^th January, 1999) and silver (100 Kgs. Per passenger, duty of Rs. 500 per Kg.). The NRI should be coming to India, after a period of not less than six months stay abroad and the duty has to be paid in convertible foreign exchange. Gold or Silver, in any form, including ornaments (excluding studded with stones or pearls) is allowed to be imported. Octroi duty will also be payable, outside the airports, as per the municipal rule.

When gold is sold in India, the profit is liable to tax as business income or capital gains, depending on the facts of each case i.e., the intention of the NRI. If his intention was to take advantage of the business opportunity and sell gold/ silver, it will be treated as business profit. If his intention was to hold it as a capital asset, it will be treated as capital gains.

Most NRIs want to take advantage of the business opportunity and buy gold/silver before coming to India and sell it soon. In such circumstances, it will be treated as business income. From the sale proceeds of the metal, the cost and expenses incurred for the sale can be deducted and profits worked out.

In a majority of the cases, the NRI would have purchased the precious metal just prior to his return to India and sold it within short time after his arrival in India, such a transaction would constitute an "adventure in the nature of trade" and the income from the sale would be taxable as business income. It is a well settled principle that income from a single transaction could also constitute business income. Hence the profit on sale of gold/silver would be treated as business income.

If the NRI has acquired the precious metal as a capital assets, the income will be treated as short-term or long-term capital gains depending on the period of holding.