Depositing gold over the limits prescribed by the Income Tax Department under the gold monetisation scheme, without explaining its source, would attract penalties on the subscriber although the taxman may not come knocking to seize the precious metal.
Citing an instruction by the Central Board of Direct Taxes of May 1994, the finance ministry, in a detailed explanation, has clarified that banks should inform depositors that gold above prescribed threshold “need not be seized by tax authorities, but the tax penalties, as applicable will be levied”.
The instruction had said that undisclosed gold amounting to 500 gram for married women, 250 gram for unmarried women and 100 gram per male member of the family should not be seized.
“Penalties may be levied by the tax authorities on deposits over this limit but it would not lead to seizure of the gold. The Income Tax Department would follow its own course. But it is not as if banks would have to immediately inform the tax department of such subscribers,” said an official familiar with the development.
The CBDT circular had further said that in case of wealth tax assesees, gold jewellery and ornaments over the declared weight should be seized while the authorised officer could increase the threshold based on the customs and practices of the community to which the family belongs and exclude it from seizure.
“The authorised officer may, having regard to the status of the family and the custom and practices of the community to which the family belongs and other circumstances of the case, decide to exclude a larger quantity of jewellery and ornaments from seizure,” it said.
To channelise gold with households and retail investors, the Union Cabinet had on September 9 cleared the gold monetisation and the sovereign gold bonds’ schemes. The gold monetisation scheme has an annual cap of 500 gram on deposits.
While the government hopes to cut down on India’s import of the precious metal by attracting households to invest their gold in the schemes, finance minister Arun Jaitley had stressed that these are not envisaged as means to convert black money into white.
“This is not a black money immunity scheme and normal taxation laws will be applicable,” he had stressed.
The finance ministry had earlier also clarified that know your customer norms would also apply to the schemes to ensure that unaccounted gold does not come into these.
“We have to make sure where the gold comes from. It could be from illicit gains or for all we know it could be stolen gold that is being brought to be deposited,” a senior officer had said at the time.
The circular is expected to bring in the much-needed clarity with many investors concerned whether depositing gold under the scheme could lead to questions by the income tax authorities.