How much gold you can hold?
How much gold you can hold?
After the demonetisation announcement there were wide rumours about government putting certain restrictions on holding of gold. In order to clear the doubts in the minds of public the CBDT issued a clarification on 1st December, 2016. This circular just reiterates the earlier directions issued to income tax officers in connection with seizure of gold jewellery and gold ornaments at the time of income tax raid, which was issued on 11-05-1994. Under this circular CDBT had instructed its officers not to seize gold ornaments and jewellery up to 500 grams for married lady, 250 grams for unmarried lady and 100 grams for male member of the family.
This means that the income tax officers can not seize gold jewellery up to the specified limit even if the income of the family does not warrant the capability of the family to own that much of the gold jewellery and ornaments.
Presently there is no law which restricts owning of gold or gold jewellery by us, what this circular does is to give relief to the people from their jewellery being taken away by the income tax officer up to certain specified limits at the time of income tax raids. This circular only covers the jewellery and ornament of the family and does not cover the cases where the jewellery is stated to be owned by other persons not of the family whose place has been raided by the Income Tax Department.
So what this circular does is puts a limit for the purpose of seizure of gold ornaments and jewellery up to the specified limits even if the source does not get explained but in now way specifies any ceiling or limit upto which you can own gold jewellery.
However if you are able to explain the source of your gold jewellery, which may be your own purchase or may even be inherited by you, at the time of such raids even income tax officers have discretion not to seize such higher quantity of gold jewellery. Even in case the gold jewellery is inherited by you and you can prove such inheritance through documentary proof like a Will supported by wealth tax return of the person from whom the jewellery is stated to have been inherited, such jewellery may not be seized at the time of income tax raids.
To the extent of these limits though the income tax department will not seize the gold ornament but in my opinion
you still may have to explain the source for purchase of such jewellery even though certain tribunals have taken contrary view.
So in case you have been buying gold jewellery from your taxable income, you need not worry about your gold holding but it is advisable to preserve the invoices of such jewellery purchases. Even in cases where your existing jewellery has been exchanged for another jewellery, please preserve the invoice for labour charges along with the invoice for original purchase. Please note that it is not necessary that the gold jewellery should have been purchased through cheques or credit/debit cards even if the jewellery has been purchased in cash and the same has been purchased out of your taxable income, you need not worry.
As far as inherited gold jewellery is concerned it is advisable to keep the copy of the Will with you along with your jewellery whether kept at home or in locker.. Moreover in case the person from whom the jewellery was inherited was a wealth tax payer, it is very easy for you to establish the quantity of gold jewellery inherited by you.
If we read the above circular strictly, it exempts seizure of only gold ornaments and jewellery and does not cover gold coins and gold bars. So the income tax officers can seize the gold coins and bars even if the weight is within the limits specified in the above circular in case you are not able to explain source of such gold coins and bars.
Though the wealth tax has been abolished very recently you were liable to file the wealth tax return for and upto 31-03-2015 in case the net taxable wealth exceeded Rs. 30 lacs on the closing of the years. So in case your wealth tax return has been filed where these gold jewellery and coins and bars have been included, the same prima facie gets explained.
I am sure the above discussion will help you understand the implications of the CBDT circular on gold seizure at the time of income tax raids.
This article has been shared by Balwant Jain. He is CA, CS and CFP. Presently working as Company Secretary with Bombay Oxygen corporation Limited, View are his personal. He can be reached at email@example.com, @jainbalwant