Keeping too Much Gold or Cash Can Lead to an IT Notice, Understand the Complete Rules Here

Income Tax Gold Rules: Did you know that India is one of the few countries where gold is widely used in the form of jewelry? In India, gold and silver are considered part of the country’s culture. They are also considered symbols of prosperity and auspiciousness. In most families, gold and silver jewelry is passed down from generation to generation. Cash is considered a blessing from Goddess Lakshmi, so many people also keep cash at home. However, very few people know that there are income tax rules regarding keeping gold, silver, and cash at home.

What are the laws regarding keeping gold at home?

The Central Board of Direct Taxes (CBDT) has set different limits for keeping gold at home. According to the rules, a married woman is allowed to keep up to 500 grams of gold. An unmarried woman can keep up to 250 grams of gold, while the limit for men is 100 grams. This gold can be in the form of jewelry or any other form.

If the gold has been purchased with declared income or tax-free income, or legally inherited, then it is not taxed. However, if you have more gold than the prescribed limit, you are required to show valid documents for it.

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What happens if more gold than the limit is found?

If, during an income tax investigation, more gold than the prescribed limit is found in your possession and you are unable to provide proof of its purchase or source, then you may face trouble. In such cases, action is taken under Sections 69B and 115BBE of the Income Tax Act. A tax of up to 78 percent can be levied on the value of the gold, along with a penalty of up to 10 percent. In serious cases, the gold may also be confiscated.

How much tax is payable on selling gold?

There is no tax on keeping gold up to the prescribed limit at home, but you have to pay tax when you sell it. If the gold is sold after being held for more than three years, then a 20 percent long-term capital gains tax is levied on the profit earned.

What are the rules regarding keeping silver at home?

Income tax laws are slightly different when it comes to silver. There is no fixed upper limit on keeping silver jewelry, coins, or utensils. You can keep any amount of silver at home, but the condition is that you must have complete records of its purchase. If the silver was inherited, a will or family documents are necessary, and if it was received as a gift, a gift deed is required.

What happens if you don’t have records for the silver?

If silver is found during an inspection, but you cannot prove its source and how it was purchased, it is considered unaccounted wealth. In such cases, Section 69 of the Income Tax Act applies. This involves a 60 percent tax, a 25 percent surcharge, and a 4 percent cess. In total, the tax burden can reach approximately 78 percent, and additional penalties may also be imposed.

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What are the rules regarding keeping cash at home?

The income tax law does not set a direct limit on keeping cash at home. This means that technically, you can keep any amount of cash at home. However, the crucial condition is that all the money must be linked to your declared and legitimate income. If the source of the cash cannot be explained during an inspection, it can become a serious problem.

What is the penalty for not accounting for cash?

If you cannot provide a satisfactory explanation for the cash kept at home, it will be considered undisclosed income. In such cases, the tax and penalties combined can amount to approximately 137 percent. In serious cases of tax evasion, a raid may be conducted under Section 132 of the Income Tax Act, and there is also a provision for imprisonment.

What is the annual limit for cash transactions?

Cash transactions exceeding ₹20 lakh in a financial year can attract the attention of the tax department. If you deposit a large amount of cash in the bank, providing PAN and Aadhaar details is mandatory.