Make sure your gold is accounted for

If you don’t have bills, look up your bank records or ask your jeweller to reissue bills. Inherited gold should ideally be mentioned in a will

Despite the finance ministry’s clarification on individual gold holdings, most people are worried about the amount of the yellow metal they can own. Reason: They might not have kept the bills for the gold purchased over the years, and what they have inherited might not have come through a will or a trust. Hence, they might find it difficult to justify their gold holdings.

While it’s important that your assets are accounted for, diligent taxpayers don’t need to worry about the precious metal they own. “It is clarified that the jewellery/gold purchased out of disclosed income or out of exempted income, like agricultural income, or out of reasonable household savings or legally inherited, which has been acquired out of explained sources, is not chargeable to tax under the existing provisions,” the government has said.

While there’s no thumb rule on how much gold an individual can hold, experts say it should be proportionate to income. “If someone earns ~12 lakh a year and buys gold or jewellery of ~50,000-60,000 in a year, that is explainable. If the same person possesses ~1 crore worth of precious metals, it indicates there’s something wrong,” says Neha Malhotra, executive director at Nangia & Co, a chartered accountancy firm. Changes are for evaders After the Taxation Laws (Second Amendment) Bill was tabled in Parliament, there were rumours that the government would tax gold holdings above a certain limit. The government, therefore, issued a clarification. The Bill hikes penalties that will be levied on individuals who declare black money voluntarily and also for cases where the tax department discovers unaccounted income. The penalty has been increased from the existing 30 per cent to 60 per cent, if sleuths detect unaccounted assets. There’s also a surcharge of 25 per cent and additional cess. “Except for the penalties, nothing new has been introduced. The limits mentioned for married and single women are part of the existing laws and apply only when the tax authorities conduct a raid,” says bullion analyst Bhargava Vaidya of B N Vaidya Associates.

If tax officials raid and discover gold and jewellery at an individual's premises, they will seize all precious metals and ornaments, except for 500grams for a married woman, 250grams for a single woman, and 100grams for each male member of the family. The officer conducting the search has the discretion not to seize even higher quantity is of gold jewellery, based on the family’s customs and traditions. But, this doesn’t mean that the Income Tax department will not question the family. The latter will still need to account for the gold or jewellery that is not seized. Justify your gold holdings Tax experts say that as the government tightens the noose on black money, it’s always better that even a diligent taxpayer be able to account for all his assets, including gold and jewellery.

In Union Budget 2015, the finance minister abolished the wealth tax. If you only held gold or jewellery worth more than ~30 lakh, you were supposed to declare it in your tax returns and pay one per cent tax on the value. If you had paid wealth tax, your holdings would be accounted for.

After abolishing wealth tax, the finance minister made it mandatory for taxpayers who have income of ~50 lakh or more to disclose their assets and liabilities from assessment year 2016-2017 onwards in Schedule AL of ITR (Income Tax Return) form, explains Kuldip Kumar, partner and leader (personal tax), PwC India. If you had disclosed the gold while filing returns this assessment year, and if it has been processed, you don’t need to worry about your holdings.

If you don’t fall in any of these categories, segregate the gold and jewellery that you have purchased, inherited, and received as gift. If you don’t have the bills for your purchases but had paid via cheque or card, request your bank for old account statements and keep it as proof. If you had purchased gold from a jeweller you know well, ask him to retrieve old bills.

An individual is required to pay income tax on gifts unless the value of all gifts, received in a year don’t add up to ~50,000; if he receives them from an immediate family member; or during his marriage. If you received gold from parents, siblings or their partners, spouse’s parents or siblings, you don’t need to pay gift tax.

Proving you have inherited gold can be tricky, unless it’s mentioned in a will, or you received it through a family trust or the one passing it is alive. To corroborate your claim of inheritance, show photographs where the person passing the jewellery is wearing it.