How much of gold can you have ? What is the tax liability on gold?

 

Gold is considered to be one of the most safest investment options by many. In fact, the gold prices have only increased over the years. Now, there are many triggers for gold price to rise even more. Some investors and experts even believe that per gram of gold can even reach Rs 10,000 !!

Gold is considered as safe-haven asset. So, whenever there is a fear of inflation, geopolitical tensions or any other Policy reforms will stimulate people increase their stake in gold. Even recently when the Rs 2,000 denomination currency notes were discontinued people started to invest in gold it seems.

Recommended reading: Why the gold prices surged? How can we invest , to gain maximum possible returns from gold?

In Indian culture, purchasing gold is considered to be very auspicious. So during festival times like navarathri, diwali, etc. , people buy more gold which then result in price rise.

Limits for holding gold:

If the sources of income and related documents could be provided, then there is no limit. These sources of income should prove that the person owning the gold has the capacity to buy that much of gold which he has. 

Any gold or gold related product stored beyond the prescribed limits might be seized, if the person being investigated do not have any documentary evidences. However, the portion of gold within the prescribed limits will not be seized even if there is no proof of investment.

Also, there is no limit for the gold which is inherited. It is not compulsory to have documentary evidence for inherited gold. So if the tax officers wants to confirm the true ownership of the person holding it, they may analyse the person's [on whom the investigation has been initiated] social status,their customs,etc.

 According to the Central Board of Direct Taxes [CBDT], the limits for having gold at home without any documentary evidence are as follows:

• Married women can hold up to 500 grams of gold.
• For unmarried women, the maximum limit is 250 grams.
• For men it 100 grams only.

These limits are only for the family members of the person, against whom the investigation as to sources of income has been initiated. If any gold of a person who is not a family member is found, then it may be seized by the tax officers who are conducting the investigation.

Tax liability on gold:

1. Firstly, the GST on is 3% and for the making charges 5% is charged on the price.
2. But, there is no GST for exchanging old jewelry for new ones in India.
3. If the value of the gold in any form [jewelry,gold etfs, gold mutual funds,etc] received as gift exceed Rs 50,000, then the entire market value is of the gold so received will be taxable. It will be taxed at slab rates under the income head 'Income from Other Sources'.
4. Also the gold received as gift on the occasion of marriage from friends and relatives, gold as gift received from spouse, or the brother or sister of the assessee[tax payer] himself or his/her spouse, is exempt from tax liability.
5. Inherited gold is also not taxable in the hands of the person inheriting it. But, if it is sold in the market he may be liable to capital gains tax in case of profits. But usually inherited gold are sold at profits only, due to gold price appreciation!😄
6. If the gold in any form is sold within 3 years of purchase, then it will attract short-term capital gains[STCG] on the profits. If sold after 3 years of purchase, then long-term capital gains[LTCG] on profits will be taxed. LTCG is taxed at 20.8% in this case, which is charged as 20% tax rate plus 4% cess.