Sarbajeet K SenMoneycontrol
Gold sales are likely to be hit in the short term with the government clarifying the cap on family holding of the yellow metal based on maximum permissible holding per individual, say industry experts.
"Gold purchases will slow down further in the short term after the clarification issued by the government on gold holding. Gold sales had already slowed down after the demonetisation move by the government," said Saurabh Gadgil, CMD PNG Jewellers and Director, Indian Bullion and Jewellers’ Association (IBJA). "Parking illegitimate money in gold will come down.”
The Central Board of Direct Taxes (CBDT) has clarified that there would be no seizure of gold jewellery and ornaments in the event of a raid if the holding is limited to 500 grams per married woman, 250 grams per unmarried woman and 100 grams per male in the family. There is also no worry if the holding exceeds the limit but is built up through legitimate means.
However, this could also be read as a warning that if you had rushed to gold stores to buy the yellow metal with illegitimate money during the recent demonetisation, you could be in trouble with the tax authorities.
"If you have bought gold during the demonetisation exercise, you cannot assume that you would be safe," said Ishu Datwani, Founder, Anmol Jewelllers.
Datwani also pointed out that the government clarification was limited to gold jewellery and ornaments and not on holding gold bars. "I think one might be in trouble if there is unexplained gold holding in bricks even if it is within the limits specified for individuals. This seems to be limited to gold jewellery and ornaments," he said.
There were rumours after the recent passage of the Taxation Laws (Second Amendment) Bill, which proposed a steep tax and penalty on undisclosed income, that the government would target gold holdings of individuals. However, the government has now clarified that there was no cause for concern if the holdings are within the limits or are acquired through legitimate means specified under the laws.
"The jewellery/gold purchased out of undisclosed income or out of exempted income like agricultural income or out of reasonable household savings or legally inherited which has been acquired out of explained sources is neither chargeable to tax under the existing provision nor under the proposed amended provisions," the CBDT has clarified.
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