Are you worried that the income tax department could conduct a search on your personal gold holdings? Read the following FAQs to understand the issue:
How will the government know how much gold I have?
The tax department has the right to conduct searches if it has information or reason to believe that a person is in possession of undisclosed money, bullion, jewellery, etc. If any gold or jewellery is found and the person can’t explain the source, it is liable to tax.
Will my gold be taxed?
In case you are not able to explain the source of income for purchase of gold in your possession, it would be liable for tax. However, if you can justify that it was purchased from disclosed income, exempted income, or out of reasonable household savings, it may not be taxable.
How much tax will I have to pay?
Gold, jewellery inherited or acquired through disclosed income will not be taxed
Will your gold holdings be taxed?
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According to the proposed amendment, the tax on undisclosed/unexplained income is proposed to be 60 per cent, which would be further topped with 25 per cent surcharge on such tax, and education cess of three per cent. In addition to the tax, surcharge and cess (77.25 per cent), a penalty of 10 to 60 per cent would be applicable, depending on the circumstances.
What kind of documents should I show to explain the source of my gold?
You will need the purchase invoice to quantify the investment. Further, the amount invested should be explained by the source of income.
If I can explain the source of my gold, then can I hold any amount of gold without being taxed?
Yes. If you can satisfactorily explain the source of income, then you can hold any amount of gold without being taxed.
Will my gold holdings of over 500 gm be seized?
During search operations, no seizure of gold jewellery and ornaments to the extent of 500 gm per married lady,
250 gm per unmarried lady, and 100 gm per male member of the family shall be made. Legitimate holding of jewellery up to any extent is fully protected. Gold even if exceeding the above limit would not be seized if it is from an explained source of income which is duly taxed or exempt from tax.
What happens if it is not inherited gold, but I don’t have receipts to prove that I purchased it?
In such a scenario, the amount of gold commensurate with your savings or disclosed income would still be protected. However, gold which does not match your explained source of income would be liable to tax.
If I have two unmarried daughters, can I show 250 gm gold in each of their names?
The limit of 250 gm or other limits are derived from instruction number 1916, which asks taxmen not to seize certain limit of gold during a search procedure. However, if you are not able to explain the source of income for purchasing such gold, you would be liable for tax even if the gold is within the prescribed limits of instruction number 1916.
Amarpal Chadha, tax partner and India Mobility leader, EY