Jigar M. Patel
International Tax Attorney
When India celebrated independence in 1947, the price of 24 carats 10 gms gold was Rs.88. Seventy-eight years down the line, it has touched the six-figure mark of Rs.1 lakh. Whether it is purchasing physical gold on auspicious occasions or buying gold bonds or mutual funds, investing in gold is quite popular in Indian households. Investors who have wisely and periodically invested in gold have undoubtedly minted fortunes! With Akshaya Tritya round the corner on 30th April, the present write-up will be of interest to one and all who love to treasure gold.
How much Gold can you Hold?
The Finance Ministry, through its Press Release on December 1, 2018, 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”. This clarification reiterated the holding limits mentioned under the CBDT Circular dated 11-05-1994, specifying the limits within which no seizure would be made during the course of search, even if prima facie, it does not seem to be matching with the income record of the taxpayer. 500 gms in case of a married lady, 250 gms in case of an unmarried lady and 100 gms per male member are the specified limits in this regard.
Quite understandably, where the taxpayer or his family members have in the past filed wealth-tax returns or even declared their gold holding in their income-tax returns under Schedule AL, the reasonableness to the extent declared should stand accepted.
Liberal Judicial Interpretations on holding of Gold
Officers of the department have often taken a myopic view of the aforesaid instructions, contending that they are to be applied in cases of search only and the same cannot be relied upon to explain the reasonableness of gold held by a taxpayer in his assessment proceedings, where an officer can reject his explanation and tax the value of such gold at the rate of 78% under section 115BBE as an unexplained investment.
Courts and Tribunals have also taken note of the fact that the said circular had directed that factors including family customs and traditions of the taxpayer should be taken into consideration while determining the reasonableness of the gold held.
Tips for Jewellery and Ornaments received on Marriage & Inheritance
The provisions of section 56(2) provide for exemption in respect of any gifts received from specified relatives. Gifts of more than Rs. 50,000 in the aggregate, if received from non-relatives, are treated as liable to tax in the hands of the recipient as income from other sources.
However, there are two useful exceptions under the said section, whereby, gifts without any monetary limit, even if received from non-relatives are treated as tax exempt. The first is in respect of gifts received on the occasion of marriage and second when property, either in cash or kind, is received under inheritance or testamentary succession.
In both the above referred cases, the taxpayer would be well advised to maintain supporting evidence to explain the source and the reasonableness of the gold ornaments, diamond jewellery or silver articles received. Documentation for valuable items received on the occasion of marriage can be in the form of gift deeds or even suitable letters mentioning the details of gifts given.
In cases of succession, the Will of the Testator should make a clear reference of the name of the legatee and the nature and quantity of the valuables bequeathed. It would be advisable for the recipient to have sufficient information in order to explain the circumstantial evidence for the items bequeathed under the Will, being in the nature of the status of the testator, relationship with the legatee and the time and source of acquisition of such jewellery and ornaments etc.
