(Prudent requirements under Law on Income Tax in the possession of jewelry over the limit prescribed by the CBDT)

Frequently Asked Questions about the government’s recent push to track unaccounted for money and investments in liquid assets like gold: –

The purpose of this article is to publicize all the possible benefits available to the wanted people regarding jewelry found during the course of the search. In this article we will discuss the various problems in detail on the following topics:

  1. Source of investment in gold or gold related items

When buying gold, you need to buy gold with the proper invoices and keep your tax invoices for future requirements. You don’t need to worry if you can explain the gold investment source. The Central Board of Direct Taxes (CBDT) has specified in its press release, dated December 1, 2016, that there is no limit to the possession of gold jewelry as long as the source of investment or inheritance can be explained. However, it is essential that the appraiser’s income is in line with the amount of gold he owns. Providing the necessary evidence for such possession will help avoid scrutiny of the income tax Department. Otherwise, the appraising officer also has the authority to confiscate the held gold.

  1. Allowable amount of gold holding

CBDT It has clarified the prescribed amount of gold that is considered admissible. Gold within this limit will not be seized even when searching the appraiser’s premises. Proof of possession and investment of the amount of gold mentioned below is not required.

Description Limit per person in a family
A married woman 500 grams
A single woman 250 grams
A male member 100 grams

Even larger amounts of gold may go undiminished at the discretion of the appraising officer based on family customs and traditions, etc. It is important to note that the limits prescribed above apply only to jewelry held by family members. In the case of jewelry found belonging to another person, it can be seized and confiscated.

The amount mentioned above is applicable to individual taxpayers. When it comes to a single locker with jewelry from multiple families, the limit will be an aggregate of each individual contributor. In this case, it is recommended to open joint locker accounts with the names of the contributors of each family. This way you will avoid confusion.

  1. What type of document / proof is valid?

The investment test will help you establish the origin of the investment in gold. In addition to the tax bills that you would keep, you may need to provide proof in the case of inheritance and gifts. In the case of an inheritance or gift, it will be great if you can provide a receipt in the name of the initial owner of the item. Alternatively, you can also file a family settlement deed, will, or deed of gift indicating the transfer of such merchandise to you.

On the other hand, if no such document is available, the officer will analyze the social status, customs and traditions of your family to reach a conclusion as to whether or not your statement is valid.

  1. Powers of Income tax Department under Section 132 of the IT Act

Article 132 of the Law confers the highest power on the income tax department (‘Department’) to invade a person’s privacy. According to this section, a search and seizure action can be carried out, in the case of any person who is in possession of money, bullion, jewelery or other article or thing of value and said money, bullion, jewelery or other article of value o The thing represents, in whole or in part, income or assets that have not been disclosed or would not be disclosed for the purposes of the Act. The department has the power to confiscate any money, bullion, jewelry or other valuable items if found without explanation at the time of the search.

The power of the authorized officer to seize jewelry during the course of the search is derived from clause (iii) of Section 132 (1), which says that the authorized officer must seize such account books, other documents, money, bullion, jewelry, or other valuable item or thing found as a result of such a search. However, in accordance with the provision of said clause, any bullion, jewelry or other article or thing of value, which is stock in the company’s trade, found as a result of said search will not be seized, but the authorized official You will need to make a note or inventory of such business stocks of the company. It is pertinent to note that the seizure of jewelry depends mainly on two situations:

a) when an appraiser has disclosed such jewelry in a wealth tax return

b) when the appraiser has not disclosed said jewels in the wealth tax return

If during the course of the search action, jewelry is confiscated from residential premises or bank locker, in many of these cases, registrants are not aware of the benefits available to them under the Act, which are explains through the CBDT guidelines and the various judicial pronouncements of the higher courts as indicated below:

  1. Guidelines issued by the CBDT vide Instruction No. 1916 dated 11thMay 1994

Regarding the seizure of jewelry in accordance with these guidelines, CBDT has established cases in which it is not necessary to seize the jewels found. Such cases are the following:

  1. In the case of an estate tax assessor, jewelry and gold ornaments that are gross weightdeclared in the declaration of the wealth tax, it is only necessary to seize them.
  2. In the case of a person who is not subject to wealth tax, jewelry and gold ornaments up to 500 grams. per married woman, 250 grams per single woman and 100 grams. per male family member, it is not necessary to seize.

III. The authorized official may, taking into account the situation of the family and the customs and practices of the community to which the family belongs and other circumstances of the case, decide to exclude more jewelry and ornaments from the seizure. This should be reported to the Director of Income tax/ Commissioner who authorizes the search at the time of delivering the search report.

Summary of CBDT Guidelines on gold holding: –

The Authorized Officer must not seize the gold jewelry found during the search, when,

(a) The investigated person has disclosed jewelry on his estate tax return,

(b) When jewelry is within the prescribed limit, that is, 500 grams for married women, 250 grams for single women, and 100 grams for male members.

(c) The authorized official may exclude a greater quantity of jewelry from seizure taking into account the status and customs of the community to which they belong.

(d) It is important to note that CBDT has established guidelines for the ‘seizure’ of jewelry found during the course of the search. However, it has been in several judicial pronouncements, discussed below, that although CBDT The instruction is a guideline not to carry out the seizure during the course of the search; among other things, it indicates the intention that the jewelry, to the extent specified in the instructions, be treated as jewelry explained in the hand of the registered person.

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