NEW DELHI – The government on Nov. 1 clarified that the exemption limit for seizure of gold jewelry and ornaments during searches for black money is 500 gm for married women, 250 gm for unmarried women and 100 gm for every male member of a family.
"No limit on holding of gold jewelry or ornaments by anybody, provided it is acquired from explained sources of income including inheritance," the government also clarified.
The government said rumors that all gold jewelry, including ancestral pieces, will be taxed at 75 percent plus a levy, with a further penal liability of 10 percent of tax payable, were totally "unfounded and baseless.”
"A reference to instruction No. 1916 which provides that during search operations, no seizure of gold jewelry and ornaments to the extent of 500 gm per married lady, 250 gm per unmarried lady and 100 gm per male member of the family shall be made," a Finance Ministry release said here.
"Further, legitimate holding of jewelry up to any extent is fully protected," it said.
In a subsequent clarification, the government included 'inheritance' as category among explained sources of income used for purchase of gold jewelry.
The earlier release only spoke of "tax rate to be charged in case of unexplained investment in assets.”
The government clarified after apprehensions arose over amendments to relevant law through the Taxation Laws (Second Amendment) Bill, 2016, passed by the Lok Sabha on Nov. 29 to deal with the situation arising out of the Nov. 8 demonetization.
The Taxation Laws (Second Amendment) Bill, proposes up to 85 percent tax and penalty on undisclosed wealth unearthed by tax authorities during search and seizures.
"It is clarified that the bill has not introduced any new provision regarding chargeability of tax on jewelry. The bill only seeks to enhance applicable tax rate to be charged in case of unexplained investment in assets," the statement said.
The bill, currently under consideration of the Rajya Sabha, seeks to amend Section 115BBE of the Income Tax Act to provide for 60 per cent tax and a 15 per cent surcharge on it for black money holders.
Another Section provides for additional 10 percent penalty if established that undeclared wealth is unaccounted or black money.
"Tax rate under Section 115BBE is proposed to be increased only for unexplained income as there were reports that tax evaders are trying to include their undisclosed income in the return of income as business income or income from other sources," the ministry said.
"The provisions of Section 115BBE apply mainly in those cases where assets or cash etc. are sought to be declared as 'unexplained cash or asset' or where it is hidden as unsubstantiated business income, and the Assessing Officer detects it as such," it added.
The government said an officer conducting searches has the discretion not to seize even higher quantity of gold than personal jewelry exempted, "based on (other) factors, including family customs and traditions.”