The jury may be still out on whether demonetisation has benefited the country. But most will agree that it has instilled fear and uncertainty in the minds of everyone. Many hoaxes have been doing the rounds, especially about gold held by households. Are there limits on how much gold can be owned by individuals? Is the government going to collect tax on gold holdings?
Let’s understand what the rules say.
No change in tax laws
There has been no change to rules about gold owned by households or individuals after the demonetisation announcement on November 8. No changes have been made in the Income Tax Act about how much gold can be held and whether it will be seized or taxed. Existing rules do not tax gold ownership. And the amendments made in the Act are related to levy of tax on undisclosed income.
Disclosure of gold holdings
Taxpayers with annual income in excess of R50 lakh have to disclose assets and liabilities owned by them under ‘Schedule AL’. This schedule was introduced in income tax return forms for FY 2015-16. Assets such as car, property, gold, bullion, etc., have to be disclosed at the price at which these were originally purchased. Inherited assets must also be included in this disclosure. If your income is below this threshold, no disclosure is required from you. Wealth tax was also abolished starting FY 2015-16, so you don’t have to file wealth tax returns.
Quantum of gold
Without doubt Indians love gold. There are days in the Hindu calendar which are considered auspicious for buying gold. Low income earners prefer to invest their hard earned money in a pair of gold earrings rather than fixed deposits. There’s frenetic gold buying before weddings. Many women possess jewellery handed down to them through generations. Is the government going to tax them? For now, the answer is ‘no’.
However, in the current scenario, you must keep track of your gold purchases. Retain bills or bank or card statements which can show these purchases are genuine. If you have inherited gold, keep a record of it. Write down the names of the people who have given the gold to you; it’s better if you have family photos to show this gold was originally owned by the giver. Keep a record of the sources of your major or large gold holdings.
Search by tax department
The new tax rules specify tax rates and penalty on undisclosed income found during a search. The amendments do not specifically mention gold. However, in the context of these amendments the tax department has clarified that there will be no seizure of gold up to 500gms held by a married lady, up to 250 gms held by an unmarried lady and 100 gms per male member of the family. So even in case of search and seizure, these holdings are safe. Besides, there is no limit on gold purchased through legitimate means.
This article is authored by Preeti Khurana and was published in The Financial Express on 12th December 2016.