How much gold can you keep at home without worrying about seizure? Know what the 500g, 250g and 100g limits mean

The presence of gold jewellery in a property during an income-tax search does not, by itself, mean that the asset can be confiscated. The tax authorities consider factors such as the source of the jewellery, the circumstances in which it was acquired and whether the holdings can be reasonably explained.

This distinction is important because the commonly cited 500-gram, 250-gram and 100-gram figures are not statutory limits on how much gold a man or a woman can own, either at a given time or in total.

The Press Information Bureau (PIB), in a clarification issued by the Ministry of Finance in December 2016, said there is no limit on holding of gold jewellery or ornaments by anybody, provided it is acquired from explained sources of income, including inheritance. It also clarified the quantities of jewellery that would generally not be seized during income tax raids.

How much gold will not be seized?

Separate quantities of gold jewellery or ornaments are treated as ordinarily not seizable for married women, unmarried women and men, even if the assets do not prima facie appear to be in line with the assessee’s disclosed income, according to the government’s notification. Here are the prescribed limits:

• For married women: Income tax officers will not to seize or confiscate gold ornaments weighing up to 500 grams.
• For unmarried women: The limit prescribed for an unmarried female in the family is lower at 250 grams.
• For males: A limit of 100 grams of gold jewellery and ornaments per person has been prescribed, whether married or unmarried.

The purpose of the circular was to avoid disputes that may arise during income tax raids, as tax officials are entitled to seize any asset, including jewellery.

What if the jewellery exceeds these limits?

If you have more jewellery at your home than the prescribed limits, it does not automatically make the excess gold illegal or automatically liable to seizure.

In such cases, the taxpayer should also be able to satisfactorily explain where the jewellery came from, along with providing supporting evidence. Such evidence can include purchase bills, bank withdrawal records, inheritance documents, gift deeds or other such documents.

Income tax officers conducting a search or raid also has the discretion to not seize even higher quantity of gold jewellery than mentioned above based on factors such as family customs and traditions, the PIB circular noted.

What happens if the person fails to provide a reason?

There is no blanket 100-gram, 250-gram or 500-gram limit on owning gold jewellery. These quantities refer to the amount of jewellery that ordinarily not be seized during an income-tax search. If you own more, the circumstances of the case and the taxpayer’s ability to explain its source become important.

If the assessee fails to offer an explanation or the reason provided is not satisfactory, the amount of such gold is taxable at the stipulated rate of 60%, along with a 25% surcharge and a 4% cess, making the tax rate as high as 78%, according to a Cleartax report.

Additionally, a 10% penalty is also payable over and above such tax. Therefore, it is prudent to keep purchase bills, inheritance documents, gift deed or other such records that would prove the source of the jewellery or ornaments during assessment by the income tax department.