A majority of Indians — irrespective of age and income — buy gold for a variety of reasons. While some buy it for investment purposes, many others go for it on special occasions like festivals and weddings, simply because buying the yellow metal is believed to be auspicious during such times and is supposed to bring prosperity and good luck going ahead.
A customer compares gold bangles inside a Jewellery store in Baramulla, Jammu and Kashmir, India on 03 February 2021. Gold Price Prediction - Prices Drop in Sympathy with Silver as the Dollar Surges (Photo by Nasir Kachroo/NurPhoto via Getty Images): Representational image© Nasir Kachroo/NurPhoto via Getty Images Representational image
Lots of people also keep buying the precious metal whenever they have spare money as they believe that there is no right or wrong time for buying gold.
However, while higher liquidity and sentimental attachment towards gold make it part of almost everyone's portfolio, the million-dollar question is: How much gold a person can legally hold in India?
The query becomes important particularly in view of the Modi government’s thrust on unearthing black money and the recent changes in income tax laws. What to do, therefore, in these circumstances to remain legally correct as also to keep income tax authorities at bay?
Tax experts say there is no need to worry where the source of such holding is legitimate.
It may be noted that Section 132 of the Income Tax Act, 1961 confers power to the Indian tax authorities to seize any unexplained jewellery, bullion or valuable articles found at the time of search.
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There is, however, no limit to the quantity of gold an individual can possess where the source of such holding is legitimate and can be explained. "Such explanation could be by way of furnishing of purchase/exchange invoices in case of original purchase or exchange of jewelry, a copy of Will or family settlement deed in case of ancestral or inheritance jewelry, and a gift deed in case of jewelry received as gift," says Sudhakar Sethuraman, Partner, Deloitte India.
In terms of the quantity of gold an individual can possess, the Central Board of Direct Taxes (CBDT) vide press release dated 01 December 2016 had clarified that that there is no limit on holding of gold jewellery or ornaments by anybody provided the same is acquired from sources explained including inheritance. For this purpose, the CBDT relied on its earlier instruction no.1916 dated 11 May 1994.
"While the Wealth Tax Act, 1957 has been repealed, one can look at the same to infer the meaning of gold whereby the same has been explained to cover alloy, whether virgin, melted, re-melted, wrought or unwrought, in any shape or form of a purity of not less than nine carats and includes any gold coin (whether legal tender or not), any gold ornament and other article of gold," says Sethuraman.
"Based on the clarification issued by CBDT time and again, an individual can hold any quantity of explained gold and the prescribed limits of unaccounted gold to avoid the taxman's ire. The taxman, however, has a right to search or question the gold either from the residential premises or the locker maintained at the bank," he adds.
In case any search is conducted, the tax authorities can confiscate the jewellery or gold if it is found that the investment is not in line with the income level of the assessee as reported in his past income tax returns.
Even in this case, however, it has been clarified by the Ministry of Finance that jewellery and ornaments to the extent of below limits will not be seized, even if prima facie, it does not seem to be matching with the income record of the assesse.
# 500 grams for married lady,
# 250 grams for unmarried lady and
# 100 grams for male member
Moreover, the income tax officer conducting search has discretion not to seize even higher quantity of gold jewellery based on factors, including family customs and traditions.
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