How much gold can you own according to the income tax rules?

Date : 25/11/2021
Read: 3 mins

Though there is no formal limit on the amount of gold one can hold, there are some rules to be aware of.

How much gold can you possess as per income tax rules?

Gold has never been a liability. Since time immemorial, it has been a symbol of wealth, power, social standing, and religious dominance, with its appeal cutting across civilisations, regions, and economic strata. Till 1971, it even dictated the value of a currency in many parts of the world, including the US.

Though this system, called the Gold Standard, was discontinued 50 years ago, governments still see other uses of gold - chiefly as a crucial reserve asset that helps build trust in a country. In fact, this is why most governments buy gold.

This, in turn, enhances the worth of gold as an investment at the individual investor’s level. After all, it is a hedge against market volatility, currency depreciation, and inflation. It is also a portfolio diversifier and ensures positive returns over the long term.

Are there any limits on holding gold?

In India, the uses of gold are varied: religious, social, cultural, and of course, investment. So much so that India is one of the biggest markets for gold in the world today with about 24,000 tonnes of it, most of it with households. This stash is estimated to be worth some $800 billion, based on 2015 prices.

Naturally, if this is the case, there will be rules and regulations surrounding gold, especially for income tax purposes. So, if one plans to hold physical gold in India (in the form of gold jewellery, gold coins, gold bars, etc.), it is advisable to know the income tax guidelines on owning this precious metal.

Three things to remember about holding physical gold in India:

There is no formal limit on the amount of gold one can hold. An old law that imposed such limits (The Gold Control Act, 1968) was abolished in June 1990.
There must be a reasonable explanation of how one’s gold was acquired. If bought, the payment receipt will suffice; if acquired as a legacy, a will bestowing the gold would help; if there is no will, the family’s social standing may be considered by the assessor. Old wealth tax returns mentioning the gold jewellery, gold coins, and gold bars in question will also do.
Even if acquired legally, the gold amount should be commensurate with the person’s or their family’s income or social status.
If no reasonable explanation is forthcoming, the gold can be seized.

CBDT and permissible gold limits

In May 1994, the Central Board of Direct Taxes (CBDT) directed its officers to allow possession of small amounts of gold ornaments. What this means is that the owner of the ornament is not required to explain how it was acquired, even if the family income does not explain its possession.

The CBDT exemption is based on gender with respect to the following amounts:

Married female: 500 grams
Unmarried female: 250 grams
Married/unmarried male: 100 grams

In the case of jewellery from multiple families in a single bank locker, the limit will be an aggregate of each individual taxpayer. Bear in mind that the exemption pertains to gold ornaments belonging to members of a single family. Those belonging to a non-family member can be seized.