Find out how much gold and silver you can hold without receiving an income tax notice..
Recently, a case came before the ITAT Mumbai where the Income Tax Department conducted a search of a woman's residence and bank locker. During the search, the department seized her diamonds, gold and silver items, and jewelry, treating them as 'assets from unexplained sources.' The search yielded gold jewelry weighing 427.71 grams, 258 grams of pure gold, diamond jewelry containing 161.33 grams of gold, and silver-based articles weighing 11.200 kilograms.
When asked about the source of funds for these items, the woman explained that the assets had been accumulated over several decades through wedding gifts, *Stridhan* (assets owned by a woman), inheritance, gifts received during family rituals, and purchases. She had been married for over 35 years and provided details showing that the family's total gross income across five relevant assessment years was approximately ₹4.55 crore.
**Reference to CBDT Guideline No. 1916**
The Income Tax Assessing Officer (AO) partially accepted her explanation and cited CBDT Guideline No. 1916. This directive outlines specific limits regarding the seizure of gold jewelry during income tax searches: 500 grams for a married woman, 250 grams for an unmarried woman, and 100 grams for a male family member. Ultimately, she won the case completely before the ITAT Mumbai. The ITAT Mumbai ruled that while gold jewellery (including diamond-studded pieces) held by a family is accepted as part of their assets, it is incorrect to treat pure gold as 'unexplained' solely based on its physical form. The tribunal further observed that the absence of old purchase bills cannot be considered the deciding factor, especially when the explanation for the assets is based on wedding gifts, inheritance, and wealth accumulated over several decades.
**No Fixed Tax Exemption or Legal Limit**
The ITAT Mumbai noted that CBDT Instruction No. 1916 does not prescribe a fixed tax exemption or a legal limit regarding jewellery holdings. Instead, the quantities mentioned in the instruction serve as a practical benchmark to determine whether the jewellery held by a family can be considered reasonably 'explained'.
However, the ITAT Mumbai clarified that its ruling regarding pure gold was limited to the facts of that specific case and should not be interpreted as a general rule implying that all gold—or pure gold—automatically falls within the ambit of CBDT Instruction No. 1916.
**How Much Pure Silver and Gold Jewellery Can Be Kept at Home?**
Chartered Accountant Suresh Surana states in an ET report that there is no prescribed legal limit on the amount of gold or silver an individual can keep at home or in a bank locker.
Surana adds that an individual can hold any quantity of gold or silver, provided it has been acquired through legal means and the individual can provide satisfactory information regarding its source. According to Surana, regarding gold jewellery, CBDT Instruction No. 1916 prescribes specific limits for seizure during income tax searches: 500 grams for a married woman, 250 grams for an unmarried woman, and 100 grams for a male family member.
Surana notes that these limits should not be viewed as thresholds for absolute, tax-free ownership, as tax authorities may still seek explanations regarding the source of the assets.
No specific quantitative limits have been prescribed in the said instruction for silver items. Surana points out a case before the ITAT Mumbai, where the tax tribunal accepted the possession of 11.2 kg of silver articles. This decision took into account factors such as the long duration of the woman's marriage, items accumulated through tradition, inheritance, and the family's financial status.
However, that ruling was based on the specific facts of that case and should not be interpreted as establishing a generally accepted limit for holding silver. Therefore, Surana advises that if large quantities of gold, silver, or bullion (unworked precious metal) are held, it is prudent to preserve evidence or documentation regarding their purchase, inheritance, receipt as gifts, or long-standing family ownership.