During Dhanteras and Diwali, people in India buy gold jewellery, coins, bars, etc. While some people buy them in small quantities, others invest in large amounts. However, when purchasing a precious metal like gold in large quantities, two questions may arise: Is there a limit to the amount of gold that I can keep at home? Can the income tax department seize gold if it is held in large quantities?
Chartered accountant Chintan Ghelani, Partner, Direct Tax, N.A. Shah Associates LLP, tells ET Wealth Online how much gold one can keep at home without attracting income tax scrutiny and when the Income Tax Department can seize it.
How much gold can I keep at home?
There are no prescribed limits on how much gold and silver you can keep at home, but there is a CBDT (Central Board of Direct Taxes) internal guideline for income tax officers as to how much gold they should not seize during an income tax search or raid operation.
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However, if you possess more gold or silver or other items than the CBDT guideline, then you need to explain their sources, like inheritance, purchase bill, etc. Then the tax officer informs his higher authorities, and then appropriate actions are taken.
In many cases, which reached various Income Tax Appellate Tribunal (ITAT) benches, where individuals could satisfactorily establish the source of their jewellery and other gold items, the income tax department was directed to release the items back to the taxpayer. So, the explanation part is important.
Ghelani says there is no prescribed maximum quantity of gold that an individual can legally own or keep at home, provided the person can satisfactorily explain the source from which the gold was acquired, such as disclosed income, inheritance, or gifts.
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How much gold can attract the Income Tax Department’s scrutiny?
Ghelani says that the CBDT guidelines are regarding the non-seizure of jewellery and ornaments during an income-tax search, and they are not statutory limits on the quantity of gold that a person can legally own.
Under these guidelines, gold jewellery and ornaments up to the following quantities would ordinarily not be seized:
•Married woman: 500 grams
•Unmarried woman: 250 grams
•Male family member, whether married or unmarried: 100 grams
This is an important distinction. A married woman is not prohibited from possessing more than 500 grams of jewellery. She can hold substantially more if the source of acquisition can be satisfactorily explained.
When Income Tax Department may not seize your gold jewellery
Taxmann, in a blog posted on its website, says if the jewellery is acquired from disclosed income, inheritance, or gifts and is within the specified limits, it is generally not liable to seizure during search operations.
Taxmann also says that the CBDT directed that in case of a person not assessed to wealth tax, gold jewellery, and ornaments to the extent of 500 gm per married lady and 250 gm per unmarried lady, and 100 gm per male member of the family need not be seized.
Seizure limits can’t be considered automatic income-tax exemptions
Ghelani says these quantities should not be regarded as an automatic income-tax exemption.
“Jewellery exceeding these limits can also be satisfactorily explained through past purchases, inheritance, wedding gifts, family customs, and other legitimate sources,” says Ghelani.
Will CBDT’s guidelines for the non-seizure of gold be applied to gold bars, coins, and bullion?
Ghelani says that another important distinction is that these guidelines concern jewellery and ornaments.
“They should not be interpreted as providing the same protection in respect of unexplained gold bars, coins, or bullion,” says the CA.
