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Gold December 02, 2016 07:30:12 AM

Taxation laws not to target gold holdings of individuals

Anil Mathews
ScrapMonster Author
Indian Finance Ministry, in a statement issued Thursday, clarified that there is no limit on holding of gold jewellery and ornaments by an individual, provided it is obtained legitimately.

Taxation laws not to target gold holdings of individuals

NEW DELHI (Scrap Monster): The Union Ministers and government officials have come out with quick clarifications regarding rumors that government would soon announce ceiling on gold holdings by individuals. The Union Information and Broadcasting Minister M. Venkiah Naidu blamed others for spreading confusion and creating panic among general public. He clarified that there is no amendment in Income Tax law pertaining to possession of gold. The Indian parliament last week had passed the second amendment to Taxation laws.

Indian Finance Ministry, in a statement issued Thursday, clarified that there is no limit on holding of gold jewellery and ornaments by an individual, provided it is obtained legitimately. The higher tax rate of up to 85% will not be applicable to legitimate gold holding, including inherited gold and gold purchased through agricultural income. Meantime, the Central Board of Direct Taxes (CBDT) officials clarified that the government has not introduced any new rule to charge tax on jewellery. The amended law will not cover gold holdings by individuals, it noted. Also, legitimate holding of jewellery up to any extent will be fully protected. The amended Income Tax laws will not be applicable to ancestral gold and gold purchased out of disclosed income. In essence, individuals will be allowed to keep any quantity of gold, provided it has legitimate source.

During IT raids, there will be no seizure of gold jewellery up to 500 grams per married lady, 250 grams per unmarried lady and 100 grams by male. The officers conducting raids are authorized to exempt higher quantities of gold jewellery or ornaments based on factors such as specific family customs or traditions.

Meantime, the bill passed by Lok Sabha proposes changes to introduce steep taxes and penalties on undisclosed wealth found in raids. The bill, currently before Rajya Sabha, proposes to amend Section 115BBE of the Income Tax Act to impose 60% tax and 25% surcharge on undeclared wealth. The provision also empowers the Act to levy additional 10% penalty if the undeclared wealth is unaccounted or black money, thereby taking the total levies to up to 85%. CBDT noted that the increased tax rate will be applicable only for unexplained income.

The cap on legitimate gold holding by individuals by the government is expected to hit gold sales in the short term. According to Indian Bullion and Jewellers’ Association (IBJA), parking of illegitimate money in gold will come down as a result of the announcement. He noted that the gold sales which have already slowed down after the demonetization move will be impeded further.

Meantime, industry participants indicate that government clarification is limited to gold jewellery and ornaments. There is no mention to gold holdings in the form of bars.

In a separate written reply to the Lok Sabha by Santosh Kumar Gangwar, Minister of State for Finance, it was clarified that the government has no proposal under its consideration to reduce import duty on gold. The Gems and Jewellery Export Promotion Council (GJEPC) has long been demanding cut in gold import duty to boost exports. The GJEPC statistics indicate that the country’s gold jewellery exports surged higher considerably by nearly 19% year-on-year to $796.60 million (Rs. 5,317.30 Crore) in October 2016. The exports during the same month last year had totaled $687.31 million (Rs. 4,471.67 Crore).

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