The government’s notification regarding inherited gold has set the alarm bells ringing for many in the country. According to the ministry of finance, 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 neither chargeable to tax under the existing provisions nor under the proposed amended provisions in tax laws.
In this connection, a reference to instruction No 1916 is also invited which provides that during the search operations, no seizure of gold jewellery and ornaments to the extent of 500 grams per married lady, 250 grams per unmarried lady and 100 grams per male member of the family shall be made. Further, legitimate holding of jewellery up to any extent is fully protected.
Somasundaram PR, Managing Director, India, World Gold Council, and Sunil Shah, Partner, Deloitte, Haskins and Sells, spell out how you can ensure your gold is safe from taxman. According to them there are seven ways to prove that the gold you have is indeed inherited:
1) Show tax receipts that prove you have paid wealth tax until 2014-15 for the inherited gold you posses.
2) You can show a will that states that the gold in your possession has been passed on to you.
3) If it is a gift, present any evidence to show that it is a gift.
4) Show valuation reports for the inherited gold if tax hasn't been paid for it. If the jewellery has been remade, show receipts for the same.
5) Show photographs to indicate the jewellery is inherited and not a new buy.
6) If you have insured your house, including gold too, then you can show this insurance as proof.
7) If you have pawned gold during distress, then those receipts would serve as proof.
There is no single way to prove that the gold in your possession is through inheritance, though.
Most first generation businessmen and their parents too would not have filed tax returns, says Somasundaram. If the businessman has a kg of gold for which he/she has not filed a wealth tax return, then the I-T would want to know the individual’s current source of income and parental source of income, if it is inherited. If there is a disparity in the source of income and the quantum of gold in hand, questions would be raised.
According to estimates, India has 25,000 tonnes of gold across the country. If one were to assume that 100 crore of the population have gold in their possession, that would mean 25 grams of gold per person. In extreme cases, people would have 100 to 150 grams of gold and would not have filed wealth tax or income tax, etc. Yet, the government has said that there would be no seizure if a married lady has 500 grams gold. If you have gold beyond 500 grams in your possession, you will have to prove your source of income. This is also what is meant by the ‘discretion’ of the officer regarding penalty or seizure.
Gold is considered and has proven to be a first asset class of the poorest too in the country and as a commodity that is widely distributed. If someone holds in today’s terms 700 grams of gold which would come to around Rs 20-22 lakh at the rate of Rs 30,000 per 10 grams, the onus is on the individual to prove his source of income.