As the deadline of 31 December 2025 approaches for filing belated or revised Income Tax Returns (ITR) for the financial year 2024-25, taxpayers must pay close attention to how they declare their assets, particularly gold. A critical point of caution is that for tax purposes, it is the physical weight of the gold, not its soaring market value, that is the key factor in disclosure and assessment.
Understanding the CBDT Rules on Gold Possession
According to the long-standing CBDT Instruction No. 1916, dated 11th May 1994, specific limits are set on gold jewellery that is exempt from seizure during an income tax search operation. The instruction clearly states that for individuals not assessed to wealth tax, the following quantities need not be seized:
- Up to 500 grams per married woman.
- Up to 250 grams per unmarried woman.
- Up to 100 grams per male member of the family.
This protection applies only if the jewellery is declared in wealth tax returns or falls within these prescribed limits. The instruction directs search parties not to seize ornaments within these thresholds during proceedings under Section 132 of the Income Tax Act.
What Forms of Gold Are Covered?
It is vital to note that this exemption is specifically for gold jewellery and ornaments. Gold coins, bars, and other non-jewellery forms are not covered under this protective limit. Mumbai-based tax expert Balwant Jain clarifies that these other forms can be seized if the holder cannot provide a satisfactory explanation for their possession and source.
Why Does This Tax Relaxation Exist?
Explaining the rationale behind this rule, Pankaj Mathpal, MD & CEO of Optima Money Managers, points to deep-rooted social and cultural customs in India. He highlights that gold jewellery is traditionally gifted to women during weddings, farewells, and the birth of children from both parental and in-law families. Recognising these widespread practices, the CBDT issued the circular to account for such holdings, often considered 'Stridhan' (a woman's personal wealth).
Mathpal further emphasises that jewellery within these limits is generally not questioned regarding its source. However, any gold holdings beyond these limits are subject to potential seizure under the Income Tax Act if the source cannot be adequately explained.
No Overall Limit on Gold with Explained Sources
An important clarification from the Finance Ministry on 1 December 2018 states that there is no upper limit on holding gold jewellery or ornaments provided it is acquired from explained sources of income or through inheritance. This means taxpayers can possess more than the exempted limits, but they must be prepared to disclose and prove the legitimate source of the additional gold during scrutiny.
In summary, while filing your revised ITR for AY 2025-26, accurately declare your gold holdings by weight. Understand the exempted limits per family member to ensure compliance and avoid unnecessary complications. Remember, the skyrocketing price of gold does not increase your tax liability on holdings, but the weight and your ability to explain its source certainly do.
