How much gold jewellery can you hold?

There is no restriction on how much gold an individual can hold. But if the amount of gold held is disproportionate to your income or you cannot explain the source of income, you could be subject to scrutiny by the income tax department.

In this context it is important to understand the Central Board of Direct Taxes (CBDT)’s circular, which states that during raids, income tax officials cannot seize gold ornaments and jewellery up to 500 grams for a married lady, 250 grams for an unmarried female and 100 grams for each male member of the family.

The circular does not specify any limit on how much gold you can hold, but only gives relief to taxpayers from their jewellery being seized and taken away by the income tax officer up to specified limits during raids, even if the sources for acquisition of the jewellery are not explained at the time or raid.

This circular only covers the jewellery and ornaments of the family. So any jewellery or ornament belonging to persons who are not members of the family can be seized and taken away.

The Income tax officer can decide not to seize and take away jewellery even if jewellery of higher quantity is found during the raid if, at the time of raid you are able to explain and prove to the officer the source from where the jewellery was acquired.

The gold jewellery can either be self-acquired or it might have come into your possession through inheritance. So in case you claim that the gold jewellery is inherited by you and are able to prove it with documentary evidence, like a will, supported by wealth tax return or income tax returns of the person deceased, the income tax officials may not seize the inherited jewellery, even if it is above the limit specified by the CBDT in its circuluar.

Please note that the above circular in no way legalises ownership of gold jewellery up to the limits mentioned in the circular. Even if the income tax officials may not seize the jewellery, you may still have to explain the source such jewellery.

So, in case you have bought the gold jewellery out of your tax paid money, you need not worry as long as your are able to prove how the jewellery was purchased by you. It is advisable to preserve all the invoices of such purchases. Even in cases where such jewellery has been exchanged, it is in your interest to preserve all the invoices for labour charges along with the invoice for original purchase. It is not necessary that the gold jewellery should have been purchased through cheques or credit/debit cards.

As far as inherited gold jewellery is concerned it is advisable to keep a copy of the will with the jewellery, whether at home or in bank locker. Also preserve wealth tax returns with valuation reports and income tax returns of the deceased person so as to avoid any unpleasant situation.

The CBDT circular refers to only gold ornaments and jewellery. So by implication, tax officials can seize any gold coins, gold bars and other jewellery found during the raids even if the weight of the same is within limits specified in the circular unless you are able to produce the proof of purchase/acquisition of these coins and bars.

Though the wealth tax was abolished, in Assessment Year 2016-17, you were liable to file the wealth tax return for and up to March 31, 2015, in case the net taxable wealth exceeded Rs 30 lakh. So in case your wealth tax return has been filed where these gold jewellery and coins and bars have been included, the source of such items prima facie gets explained.

The writer is a tax and investment expert