It is a very common & usual question being asked by people as to how much Gold/Gold Ornaments can a person hold without attracting the ire of the Income Tax Department.
The answer is simple. One can hold or possess as much gold or gold ornaments as he desires provided he is able to explain & prove the source of acquisition from disclosed sources else there is no limit to legally & validly hold any quantity of gold/gold jewellery. It is pertinent that Gold Control Act 1968 imposed various restrictions on the quantity of gold/gold ornaments which a person could hold under the provisions of the said Act but the said Act stands repealed in 1990.
As of now, there is no column in the Income Tax Return where an Income Tax assessee is required to state gold/gold jewellery held by him/her. However earlier the assessee was required under the Wealth Tax Act 1957 to disclose the quantity and valuation of gold/jewellery held by him but the Wealth Tax Act stands repealed from Assessment year 2016-17. However, for the assessees who had filed their Wealth Tax Return would have disclosed their gold/Silver/ ornaments/ precious & semi precious stones held by them. Thus, the precious metals/jewellery/ precious stones shown in the Wealth Tax Returns are duly disclosed and such persons can validly & legally hold such precious metals/ jewellery/ stones without any fear of their seizure by any Government Department. However, if the person has acquired such metal/ jewellery from disclosed sources later on, all such precious metals/jewellery can be held without any element of fear.
Now, suppose the person had not filed it’s Wealth Tax Return for any reason whatsoever, but owns precious metals/ jewellery, he/she need not be daunted if the acquisition of said jewellery can be proved for an anterior date say 10 years or more. Suppose a woman got married in 1980 and she received gold jewellery and gold sovereigns at the time of her marriage ceremonies and she could prove, through marriage photographs & other documentary evidence that the items of jewellery held by her are the same, for all taxation purposes, would be disclosed jewellery and can not be seized by any Government Department. Similarly, if s person has purchased precious metals/ jewellery from a VAT/GST registered dealer, there is no chance of it being seized.
I have been a part of the search team under the Income Tax Act and it is expedient to sum down my experiences as far as they concern detection/ seizure of gold/ gold jewellery. Firstly the Authorised Officer (AO) asks the searched people as to where they are assessed to Income Tax & Wealth Tax and to prove that the jewellery found is duly disclosed. Most of the people give the same answer that the file is with the CA/ Tax Consultant and they have no idea about the same. It is expected from every assessee to have Xerox copy of his Income Tax returns and if he has disclosed the said jewellery in the Wealth Tax Return, then a copy of the said returns. It was mandatory for all Wealth Tax assessees to file Form O-8 or O-8 A along with their returns which gives details of the individual items of jewellery and their valuation as certified by the Government Approved Valuer. All assessees for their benefit should keep a copy of the Form O-8/ O-8A with the jewellery whether in the bank locker or your home safe. This will increase your bonafide and help the AO to take a decision against seizure of the jewellery found during the course of search.
It is my practical experience that even small quantities of gold jewellery belonging to a number of major & minor members are seized by the searching party in absence of documentary proof that the same is ‘disclosed’. It is self evident that in our culture, gold jewellery is given from a birth of child to their marriage and even thereafter. People consider gold & silver auspicious and gold/silver jewellery is held by ladies of all caste, creed, religion and class. The Central Board of Direct Taxes has issued Guidelines/ Instruction No. 1916 dated 11th May, 1994 in the matter of seizure of jewellery, which reads as under:
“Instances of seizure of jewellery of small quantity in the course of operation under section 132 have come to the notice of the Board. The question of a common approach to situation where search parties come across items of jewellery has been examined by the Board and following guidelines are issued for strict compliance.
(i) In the case of a wealth-tax assessee, gold jewellery and ornaments found in excess of the gross weight declared in the wealth-tax return only need to be seized.
(ii) In the case of a person not assessed to wealth-tax gold jewellery and ornaments to the extent of 500 gms. per married lady 250 gms per unmarried lady and 100 gms. per male member of the family, need not be seized.
(iii) The authorized officer may having regard to the status of the family and the customs and practices of the community to which the family belongs and other circumstances of the case, decide to exclude a larger quantity of jewellery and ornaments from seizure. This should be reported to the Director of Income-tax/Commissioner authorizing the search all the time of furnishing the search report.
(iv) In all cases, a detailed inventory of the jewellery and ornaments found must be prepared to be used for assessment purposes.”
It is ironical that most of the officials/ tax practitioners/assessees are not aware of this benevolent instruction which is binding on all Income Tax officials. As per the said CBDT Instruction in large family gold jewellery of a few kilograms can be released as per the said instruction.
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