Gold jewellery at home: Can income tax department seize it? What the 500g, 250g and 100g rules actually mean

Having more than 100 grams of gold jewellery does not automatically mean the income tax department can seize it. The issue usually comes up during an income-tax search, when officers find gold or jewellery and examine whether its ownership and source can be explained.

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

However, owning jewellery within these limits does not necessarily mean there can never be questions about its source. “You still may have to explain the source of acquisition of such jewellery at the time of assessment,” Jain said.

What happens if you have more gold?

CA Abhishek Jain, Partner (Direct Tax) at V. V. Kale and Company, said the limits come from CBDT Instruction No. 1916 dated May 11, 1994.

Under the instruction, jewellery found during a search should ordinarily not be seized up to:

• 500 grams for a married woman

• 250 grams for an unmarried woman

• 100 grams for a male member

This means that jewellery within these limits is ordinarily protected from seizure during a search, even if the person is unable to immediately produce documents proving its source or acquisition, according to Abhishek Jain.

What if the jewellery exceeds these limits?

Crossing the prescribed limits does not automatically make the excess gold illegal or automatically liable to seizure.

"If the taxpayer can satisfactorily explain where the jewellery came from and has supporting evidence, it can also be considered explained. Such evidence could include purchase invoices, wealth declarations, bank withdrawal records, inheritance documents or gift deeds, among other documents," said Abhishek Jain.

The CBDT instruction also gives the officer discretion to not seize a higher quantity of jewellery depending on factors such as family customs and traditions.

Keeping purchase bills, inheritance papers, gift documents and other records that establish the source of the jewellery can therefore be useful if the tax department raises questions.