How art assets are taxed?

Art is now widely recommended by experts not only in India but internationally as a safer and reliable investment avenue. Financial advisors recommend it as an alternative asset class for long-term purpose. They do so largely owing to its immense potential for appreciation. If you buy the right works of art, they can yield multifold returns. What matters is the selection of right artists with help of professional advice.

Of course, not everyone will be buying art for the sheer love of it. There are commercial considerations to it, which is understandable. So you need to take into account several vital factors. Listing some of them, investment expert Gautam Nayak, mentions in a column (‘Beyond The Tax Book’; The Mint):

“You need to factor in, for instance, the lack of a transparent and open market for art and, consequently, the low liquidity. Also, if you opt to decide to invest in art, you should know how you would be taxed on such investments.”

The tax aspect is also to be considered with care. The question to be asked in this regard is: Can you consider that a sculpture or a painting is a personal asset that you have acquired for sheer personal pleasure? If you say so, is any gain you happen to make on the sale of such work (painting or sculpture) therefore, is not taxable?

This was indeed the case until March 31, 2007. Till this point, art (painting or sculpture) was not considered or treated as a tangible capital asset. As a result, any (monetary) gains that were made on sale of such assets were not subject to any capital gains tax provisions. So what has now changed about the process?

This is what we are going to follow…We are going to take into account the taxation related factors while acquiring art.