Income Tax on Gold Holding: All You Need to Know

The  instruction that prescribes the quantity of gold that, the Central Board of Direct Taxes (CBDT) has issued on 11^th May 1994 clarified that, a person who is not assessed to wealth tax can hold as much as, 500 grams per married woman, 250 grams per unmarried woman and 100 grams per male member of the family.

It was added that the authorised officer could also exclude a larger quantity of jewellery or gold from seizure with regard to customs and traditions. It was also clarified that in such cases where a larger quantity of gold and ornaments are excluded from seizure, the authorised officer shall report the same to the Director of Income Tax/Commissioner who authorised the search at the time of furnishing the report of search.

In the case of a person who is assessed for wealth tax, only the gold ornaments and jewellery found in excess of the return in wealth tax needs to be seized.

According to the Section 69B of the Income Tax Act, 1961, if any taxpayer is found to be the owner of any jewellery or other valuable articles, and the value of the same exceeds the amount recorded as income in the books of account of the year maintained by the taxpayer, then the value of such valuables such as gold may be deemed to be the income of the assessee for the year, if no satisfactory explanation could be offered.

The rate of tax of such unexplained investments are taxable according to the rate specified in Section 115BBE, as per Section 69B of the Income Tax Act, 1961.

The tax rate on such income is 60% of the unexplained income plus surcharge at 25% of the tax along with normal cess and higher education cess as applicable.

A penalty under Section 271AAC (where the income has not been included in the return filed under Section 139) at 10% of such tax payable under Section 115BBE(1)(i) of the Income Tax Act may also be imposed.

By way of judicial pronouncements, courts and various tribunals have held that –

1. It is normal custom for a woman to receive jewellery in the form of stridhan or on various other occasions such as childbirth.
2. No addition is called for when total gold jewellery available with the assessee as shown in wealth tax return and obtained on the maturity of Gold Bond Scheme which is more than the gold jewellery weighing found during the course of search.
3. No seizure is possible where the gross weight of jewellery disclosed by the family in their regular returns is in excess of the gross weight of jewellery found in search.
4. In cases where jewellery is claimed to be as per a will (ancestral jewellery), the assessee is bound to provide evidence that the will has been executed prior to search. In the light of sufficient proof, the jewellery thus obtained shall be deemed to have been explained.
5. The limits prescribed in the CBDT Instruction/Circular No. 1916, Dated 11^th May, 1994 are applicable only to ornaments made of gold and gold jewelleries. It is not applicable to diamond jewellery or diamonds embedded or studded within gold jewellery.

Additionally, an application for release of the articles seized shall be submitted to the assessing officer from thirty days within the end of the month in which the asset was seized, as per the Proviso to Section 132B(1) of the Income Tax Act, 1961.

Support our journalism by subscribing to TaxscanPremium. Follow us on Telegram for quick updates.