In the wake of Taxation Laws (Second Amendment) Bill, 2016 which has been passed by the Lok Sabha and is under consideration with Rajya Sabha, too many rumors have been making rounds that all household gold jewellery holdings including ancestral Jewellery shall be taxed @75% plus cess with a further penalty liability of 10% of tax payable.
I too have received lot of queries on ; How much can one hold or invest in Gold ornaments? Whether the govt or the Income Department officer(s) will seize the gold jewellery holdings kept in a Bank locker? What is the tax rate or tax penalty on unexplained investments in Gold? …
The Finance ministry has given clarification on these apprehensions. It has been clearly stated that that the jewellery with the household which is acquired-out of disclosed sources or exempted income shall become taxable under the proposed Taxation Laws (Second Amendment) Bill, 2016, is totally unfounded and baseless.
The govt has stated that no new provision regarding changeability of tax on jewellery has been introduced by the CBDT (Central Board of Direct Taxes).
Gold Jewellery Holdings – How much Gold can I hold?
- There are no restrictions or limits on how much Gold you can hold, if the jewellery/gold is purchased out of;
- Disclosed income (or)
- Exempted income like agricultural income (or)
- Out of reasonable household savings (or)
- Legally inherited which has been acquired out of explained sources.
- The Gold jewellery holdings which are legitimate are neither chargeable to tax under the existing provisions nor under the proposed amended provisions.
- It has also clarified that during IT dept search operations, no seizure of gold jewellery and ornaments to the extent of ;
- 500 grams per married lady,
- 250 grams per unmarried lady and
- 100 grams per male member of the family shall be made.
- I believe that there are no restrictions with respect to investments in e-Gold (Gold funds/ Gold Exchange Traded Funds).
Blackmoney in Gold investments – What is the Proposed Tax rate & Penalty?
But if one possesses un-explained investments in Gold & other precious metals then the proposed Tax rate of 60% plus Surcharge of 25% (ie 15% of tax) can be levied. A penalty of 10% can also be levied. So, the total tax rate can be 85% (60% + 15% + 10%).
Kindly note that these are proposed tax rates only. The Taxation Laws (Second Amendment) Bill is yet to be enacted by the Parliament.
Govt states – ‘There is no limit on holding of gold jewellery or ornaments by anybody provided it is acquired from explained sources of income including inheritance.”
In India, how many households pass on the gold jewellery holdings through WILLs? It is common for most households to pass on jewellery from a mother to a daughter/bride. Can one be able to prove that the Gold kept at home or in a bank locker is through inheritance? Also, most of the gold purchases do not have any proper bills. So, it can be a challenging task to prove that the holdings in Gold are indeed legitimate/acquired through inheritance.
Also, the Govt has given one subjective statement i.e., “Officer conducting search has discretion not to seize even higher quantity of gold jewellery based on factors including family customs and traditions.” This can surely lead to lot of confusion.
Personally, I believe that Gold is an unproductive asset. But, it’s a tradition and sentiment in most of the households to hold or invest in Gold or gold jewellery.
So, let’s hope that the govt and/or the tax department comes up with more and detailed notification on this topic. Else, this can not only lead to more confusion among the public but can hurt the sentiments to certain extent.
(Image courtesy of yodiyim at FreeDigitalPhotos.net0) (Post published on 02-December-2016) (Reference : Statement issued by the Finance Ministry)