Gold has a deep rooted significance in Indian culture, alluring people with its beauty and charm. Its golden glow evokes emotions as a culturally significant metal which has found a significant place in Indian hearts and homes alike.
Indians have a great infatuation with gold since a long time which has only grown stronger over the years. For that reason, Indians consume the most gold globally and it along with real estate makes up almost two-thirds of Indian household savings.
But we should definitely be aware of the answers to the different questions on investment in gold. Is investment in gold safe? Should I disclose the investment made in gold in my income tax returns? What are the precautions I need to take from a tax perspective? All these questions assume importance in view of the Government’s recent thrust on tracking unaccounted monies and investments.
Indians purchase gold for various reasons, may it be for auspicious occasions or for the love of wearing ornaments. It also seems to be a favourite investment option for many people not only in the form of jewellery, but also as gold coins, gold bars etc.
Even though a vast majority of the Indian population survive on meagre resources, they still find ways to buy gold and make it an integral part of their lives.
The reasons why gold is the most preferred investment can be summarised as below:
Religious Connotations: Gold is an integral part of religious ceremonies in India, regardless of religion. It is common for people to purchase gold at different religious gatherings and for different occasions.
Family heirloom: Gold is part of every Indian household and is considered a family heirloom passed on from generation to generation, in a bid to keep family legacy alive.
Golden Gifts: Gifting gold is considered auspicious in India, with gold gifts forming an integral part of all ceremonies. A gift of gold is perhaps the highest form of gifting in the country, showcasing the value of an individual and purity of intent.
Status Symbol: There is no bigger status symbol than gold in India, and Indians are not shy to flaunt it. In any social setting, gold is one element which can help people stand out, literally shine in the crowd.
Investment: Gold has been considered the safest investment, a sentiment which Indians live by. It is this property of gold as a protector against bad times which have pushed Indians to buy it as investments.
However, according to the Income Tax rules, there is a limit and procedure on how much gold one can keep at home.
A married woman can hold up to 500 grams of gold, whereas, an unmarried woman can hold up to 250 grams of gold, even if they fail to produce their income proof. Male members are allowed to hold only 100 grams of gold without justifying their income status.
Hence, the Income Tax Department will not seize and confiscate jewellery and ornaments to the extent of the above limits, even if the same is not matching with the income tax records.
The Central Board of Direct Taxes (CBDT) press release has clarified that there is no limit on holding of gold jewellery or ornaments by anybody provided it is acquired from explained sources of income, including inheritance. Hence technically the Income Tax Act does not prescribe any limit for holding gold and ornament by any person, provided you are able to show/explain valid sources of the gold acquired.
However, it is essential that your income is in line with the quantity of gold held. Providing necessary proof for such possession will help in avoiding scrutiny and even confiscation by the Income tax department.
While buying gold, it is necessary that you take and retain your tax invoices for the purchase, be it jewellery or bullion. Apart from the tax invoices that you would keep, it is a little tricky that what kind of proof is necessary in case of inheritance and gifts. Documents like a gift deed or receipts with the name of the initial owner of the item may be helpful along with a family settlement deed, Will, or a special gift deed stating the transfer of such item in your hands.
Even a higher quantity of gold may be left unseized based on the assessing officer’s discretion. Factors such as family customs and traditions can be considered for such a decision.
It is important to note that the limits prescribed above apply only to jewellery held by members of the family. In the case of jewellery found belonging to any other person, the same can be seized and confiscated.
Indians consider gold a super-metal, a super-metal which can provide a solution to multiple problems. But its better be careful to take these precautions so that you don’t get into trouble with the tax authorities.
Because, you’re worth more than gold!
CBDT Circular dt. 01/12/2016 for your reference:
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
New Delhi, 01 December, 2016.
Sub: Clarifications with respect to Gold Jewellery under Income Tax Law
In order to remove any doubt about the current position of Income Tax Law with respect to gold jewellery, the following points are categorically clarified:
There is no limit on holding of gold jewellery or ornaments by anybody provided it is acquired from explained sources of income including inheritance.
Vide circular dated 11.5.1994, instructions have been issued in the matter of search and seizure of gold jewellery.
Jewellery and ornaments to the extent of 500 gms for married lady, 250 gms. for unmarried lady and 100 gm for male member will not be seized, even if seized.
It does not seem to be matching with the income record of the assesse, will not be seized.
The Officer conducting search has the discretion not to seize even higher quantity of gold jewellery based on factors including family customs and traditions.
(Meenakshi J. Goswami)
Commissioner of Income Tax
(Media and Technical Policy)
Official Spokesperson, CBDT.