The Central Board of Direct Taxes (CBDT) has clarified that married women can up to 500 grams, unmarried women up to 250 grams and men (irrespective of marital status) up to 100 grams can keep gold at home without proof.
Possessing gold beyond these thresholds is not illegal, but it does require proper documentation to justify ownership. Individuals must be able to establish the lawful source of the excess jewellery through verifiable records such as purchase invoices or bills, Gift deeds or declarations or Documents of inheritance or will.
If such documentation is missing, or if the source of acquisition appears disproportionate to the individual’s declared income or financial background, the Income Tax Department is empowered to seize the unaccounted portion during search operations.
The CBDT circular of 1994 was introduced with the intent to prevent undue harassment and arbitrary seizure of family ornaments during income tax raids. Recognizing the cultural, social, and emotional significance of gold in Indian households—especially among women—the framework ensures that legitimate family holdings are respected and safeguarded.
Tax Implications on Sale of Gold
Merely owning gold does not attract tax liability. However, selling gold may lead to capital gains tax, depending on the duration of holding:
- Short-Term Capital Gains (STCG)
If the gold is sold within 2 years of purchase, any profit is taxed as per the individual’s applicable income tax slab rate.
- Long-Term Capital Gains (LTCG)
If held for more than 2 years, profits are subject to a flat 12.5% tax rate, in accordance with recent amendments.
Maintaining clear and verifiable records of acquisition and sale transactions is crucial for accurate computation of gains and to avoid disputes with tax authorities.
