How much GOLD you can hold

Balwant Jain

After the announcement of demonetisation, there were wide rumours about the 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 December 1, 2016. This circular just reiterates the earlier directions issued to income tax officers in connection with seizure of gold jewellery and ornaments at the time of income tax raid, which was issued on May 11, 1994. Under this circular, the CDBT had instructed its officers not to seize gold ornaments and jewellery up to 500 grams for married women, 250 grams for unmarried women and 100grams for male member of the family.

This means that the income tax officers cannot 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.

Currently, there is no law which restricts ownership 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 ornaments 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 no way specifies any ceiling or limit up to 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 raid.

To the extent of these limits, though the Income Tax Department will not seize the gold ornaments, 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 new 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 at home or in a locker. Moreover, in case the person from whom the jewellery was inherited was a wealth taxpayer, it is 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 the source of such gold coins and bars.

Though the wealth tax has been abolished recently, it was mandatory to file the wealth tax return for and up to 31-03-2015 in case the net taxable wealth exceeded Rs 30 lakh on the closing of the year. So in case your wealth tax return has been filed where these gold jewellery, 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.

The writer is CA, CS and CFPCM. The views expressed in this article are his own