Large gold deposits should match your declared income

Arnav PandyaThere are several events which could give rise to some tax related problems and one of them is going to be gold monetisation scheme that will soon be available for individuals. The reason why this is going to be an issue is due to the fact that there is a worry that people who come to deposit gold would need to ensure that there is no black money involved in the entire process. This is important because it could end up being used as a conduit to get black money converted into white. In order to ensure that everything is in order there will have to be several things that need the attention of the individual. Here are a few of these points.Deposit explainedThe first thing that an individual will have to do is to ensure that they are able to explain the source of income of the gold that they have purchased. One of the best ways in which this can be done is to have a bill for the purchase. There could be times when this is not available. Also there might have been several years of savings before some gold is purchased so the exact details on this front would need some attention. What has been clarified from the side of the government is that this route will not be allowed to be used for the purpose of turning black money into white. There is a further detail that has emerged which is that gold deposits which are more than 500 gms which are not backed by known sources of income would attract income tax.Cut off and clarityThe fact that the government has mentioned a specific figure of 500 gm means that there is clarity on the subject for the individual because they know the exact position. This is also a relief for a lot of small investors because the cut off is actually quite high and those who have a lower amount that they would want to give for the scheme would not have to worry about the tax impact that they would end up facing. There is also the aspect of the term known sources of income. If the individual wants to deposit a larger amount then this would need to be backed by known sources of income. What this means is that it should not be that the income of the individual is Rs 5 lakh per annum and he wants to monetise gold worth several times this figure as this might not match with the income details.Allowed holdingsA certain amount of gold holdings that are held by an individual who is not a wealth tax payer is not considered to be a problem and even in case of a search by the tax officers this amount is not seized. There is a specific figure that is allowed. For example as per the instructions of the Central Board of Direct Taxes gold jewellery to the extent of 500 gm per married lady , 250 gm per unmarried lady and 100 gm per male member of the family need not be seized by the tax authorities but this might be subject to levy of penalties. For those who file wealth tax returns only gold jewellery found in excess of the amount shown in the return would be seized. Again these limits can be increased at the discretion of the assessing officer. However as long as the details of the gold held are backed by the necessary details and this has been correctly disclosed then there should not be much of a problem and the entire process can go on smoothly.