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How much gold can you keep at home? Limits and income tax rules explained

After the RBI's decision to phase out ₹2000 denomination currency notes, there are reports indicating a surge in demand for gold jewelry.

  • 118,493 Views | Updated on: Oct 06, 2023

One precious metal whose value has only increased over time is gold. In India, purchasing gold during a celebration is said to be lucky. Many of us love having gold, whether coins or jewelry, in our homes.

Understanding the terms and conditions, fees, and the process of converting digital gold into physical gold, if desired, is crucial for making informed investment decisions in this evolving financial landscape.

What is the Gold Storage Limit?

There is no limit on how much gold jewelry you can keep at home, provided you can explain the source of income that allowed you to buy or invest in case of an income tax investigation. However, there are limits on the amount of unaccounted gold jewelry that can be kept at home without any tax troubles. According to the Central Board of Direct Taxes (CBDT), the limits for holding gold jewelry and ornaments without showing any proof are:

  • Married woman: Up to 500 grams of gold
  • Unmarried woman: 250 grams of gold
  • Men: Only 100 grams of gold

How is Gold Taxed?

Gold, often hailed as a symbol of wealth and prosperity, is significant in the financial world. As individuals buy, sell, and exchange gold for various purposes, understanding how gold is taxed is crucial for making informed financial decisions.

Goods and Service Tax (GST) on Gold Purchases

The Goods and Service Tax (GST) is applied at 3% on acquiring gold and 5% on the associated making charges. In the case of exchanging gold items such as bars or coins for new jewelry, no additional GST is imposed up to the weight equivalent to the exchanged gold (bars or coins). GST only applies to the value exceeding the weight of the exchanged gold.

It is important to note that no GST is levied on the outright sale of gold.

Income Tax on Gold:

Gifts: Jewelry, Bullion, Gold ETFs, and Gold MFs

Receiving gold in the form of jewelry, bullion, Gold Exchange-Traded Funds (ETFs), or Gold Mutual Funds (MFs) as a gift becomes taxable if the aggregate market value of the received gold exceeds ₹50,000. The taxation is categorized under the ‘Income from other sources’ and is subject to applicable slab rates based on your income bracket.

Nevertheless, certain exemptions from taxation are provided by the Act in specific circumstances:

  • If the total value of gifts received within a year is up to ₹50,000.
  • Gifts received from specified relatives, including:
  • Spouse
  • Brother or sister of you or your spouse
  • Lineal ascendant or descendant of you or your spouse (e.g., Children, parents, grandparents, etc.)
  • Gifts received on the occasion of your marriage from friends or relatives
  • Any asset received as inheritance under a will or any law of succession applicable to you

Physical and Digital Gold

A short-term capital gains tax will be assessed if you sell the physical gold within three years of purchasing it; if you sell it beyond that time, a long-term capital gains tax will be assessed. The short-term capital gains will be taxed at the income tax slab rate and added to the total taxable income. Meanwhile, the cost of purchasing digital gold has no upper limit. However, you can only spend up to ₹2 lakh on gold daily.

Long-Term Capital Gains Tax (LTCG) for physical and digital gold is payable at a 20% + cess and fee rate when selling digital gold after three years. Returns on digital gold, however, are not immediately taxable if kept for less than three years.

Different Types of Gold

Gold, often referred to as the “king of metals,” has captivated humanity for centuries due to its intrinsic beauty, rarity, and enduring value. While the allure of gold is universal, not all gold is created equal. The various types of gold, each with distinct characteristics and applications, contribute to the rich tapestry of this precious metal.

Physical Gold

Physical gold refers to the tangible form of this precious metal, commonly available in coins, bars, or jewelry. Unlike paper or digital representations of wealth, physical gold provides individuals with a concrete and enduring asset that has been valued for its beauty, rarity, and intrinsic worth throughout human history.

One of the distinctive qualities of physical gold is its historical significance. Across civilizations and centuries, gold has symbolized wealth, power, and luxury. It has been used as currency, adornment, and a store of value. Even in the modern era, physical gold maintains its allure, connecting investors to the enduring legacy of this precious metal.

Digital Gold

Digital gold refers to a form of investment that allows individuals to own and trade gold in electronic or digital format, eliminating the need for physical possession of the precious metal. This innovative financial instrument leverages technology to provide investors a convenient and accessible way to participate in the gold market.

Sovereign Gold Bond (SGB)

Individuals can only invest a maximum of 4 kg per year in SGB. The holdings used as collateral by banks and other financial institutions will not be included in the investment ceiling.

No outward costs are associated with purchasing sovereign gold bonds (SGBs), as you are not required to pay GST. An SGB receives interest at 2.5% annually, added to taxable income and assessed according to the applicable slab. After eight years, SGB profits are, however, tax-free.

Gold ETFs And Mutual Funds

LTCG applies to mutual funds and gold ETFs when held for more than three years. For investments made for less than three years, the rate is the same (20% plus 4% cess), and the gains are applied to your taxable income and taxed according to your IT slab.

The expenses, minimum and maximum limitations, and tenure times of various gold investment products vary. Therefore, before investing, be sure to exercise due diligence.

Wrapping Up

Owning gold at home is a common practice, and while there are no strict limits on jewelry, there are guidelines for gold coins and bars. Understanding the income tax rules related to gold ownership is crucial to ensure compliance and transparency in financial matters. It is advisable to stay updated on any regulation changes and consult with financial experts for the most accurate and current information regarding gold ownership and income tax implications.

The general public has always been satisfied when investing in gold because it is precious. Different gold investments vary in expenses, tenure times, and minimum and maximum limitations. Therefore, it becomes essential to conduct thorough research and analysis before making the decision to invest in gold.

Key Takeaways

  • According to prevailing regulations, the permissible limits for personal gold holdings differ based on marital status.
  • Married women can possess up to 500 grams of gold, while unmarried women have a limit of 250 grams.
  • In contrast, the limit for men is restricted to 100 grams of gold, reflecting variations in statutory guidelines concerning individual gold ownership.
  • It is essential for individuals to stay informed about such limits and adhere to them in compliance with applicable laws.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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