Old Tax Loophole Lets Households Hold ₹1 Crore in Gold Without Proof, Sparking Black Money Concerns
Old Tax Loophole Lets Households Hold ₹1 Crore in Gold Without Proof, Sparking Black Money Concerns
A decades-old tax guideline is allowing Indian households to legally hold significant quantities of gold—worth up to ₹1 crore—without the need for any documentation or proof of purchase, raising fresh concerns about its potential misuse for laundering unaccounted wealth.
The rule, which dates back to a 1994 directive issued by the Central Board of Direct Taxes (CBDT), exempts individuals from having to explain or provide receipts for gold holdings up to a specified limit: 500 grams for a married woman, 250 grams for an unmarried woman, and 100 grams for a man. These thresholds were designed to prevent harassment during tax raids for holding personal jewellery.
At the time the guideline was framed, gold prices were significantly lower—less than ₹5 lakh per kilogram. Today, the same quantity of gold commands a market value of nearly ₹87 lakh, making it possible for individuals to legally possess gold worth close to ₹1 crore without offering any explanation of the source of funds.
This long-unrevised rule has become a grey area in the tax system, as rising gold prices have far outpaced the growth of average household income or savings. The mismatch raises concerns that individuals may be using this exemption as a legal cover to convert black money into gold, particularly because tax authorities are barred from questioning gold holdings within these specified limits during search and seizure operations.
Experts believe the outdated limits may now be inadvertently enabling tax evasion. With gold remaining a preferred vehicle for wealth storage and informal transactions, the loophole offers a convenient way to park unaccounted income in a form that is both easily concealable and legally protected.
There is growing demand for the CBDT to revisit and revise the 1994 norms, either by lowering the quantity thresholds or by linking them to current market values. Some suggestions also include introducing separate criteria for exemptions based on the date of marriage or income levels.
As India strengthens its efforts to improve tax compliance and financial transparency, reforming such legacy provisions may be necessary to close loopholes and ensure that outdated rules are not misused to shield illicit wealth.
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Mariya is the Senior Editor at JurisHour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.
