It’s wedding season in India, which basically means two things: back-to-back functions, and families across the country moving one of their biggest assets… gold.
Because in India, gold has never been just jewellery. It’s liquidity, it’s inflation-proof, it’s safety, and for many families, it’s the most reliable backup.
A significant portion of this gold is often gifted to the bride as Stree Dhan (woman’s wealth) – fully tax-free, culturally rooted and deeply personal as it’s meant for her financial security. But the moment you move from tradition to taxation, you need to consider:
- How much gold should a family hold?
- And when does family jewellery start looking like unaccounted gold to the Income Tax Department?
Let’s start with the basics.
How much gold is acceptable to hold?
There is no legal limit on how much gold you can own in India, as long as you can explain the source of income used to acquire it. The limits people usually refer to are CBDT’s non-seizure guidelines, used during income tax search and seizure operations.
The non-seizure limits for gold jewellery in India are:
- Married woman: up to 500 grams
- Unmarried woman: up to 250 grams
- Male member: up to 100 grams
Jewellery within these limits is generally not seized during a tax raid, even if you cannot immediately provide bills or explain the source. These thresholds are considered culturally reasonable for an Indian household.
But what happens when your gold crosses these limits?
What is unaccounted gold?
Unaccounted gold includes any jewellery, coins, or bars for which you cannot provide a verifiable, legal source of acquisition. This includes:
- Gold bought using undeclared income (black money).
- Gold received as a gift or inheritance without proper documentation, especially when the quantity exceeds the non-seizure limits.
If gold found during a search exceeds these limits, and you cannot satisfactorily explain its source, the excess can be treated as an ‘Unexplained Investment’ under section 69B of the Income Tax Act.
What counts as proof for gold?
To show that your gold is legitimate, the ITD generally accepts:
- Purchase invoices from jewellers
- Gift deeds or declarations, especially for high-value gifts
- Will or inheritance documents
- Wealth tax returns (for older holdings)
- Bank withdrawal records linked to the purchase
Even partial documentation can help, as long as your explanation is reasonable and consistent.
Tax implications of unexplained gold
If your gold cannot be properly explained, it doesn’t get the benefit of normal tax rules. Rather, it falls under a stricter framework.
Unexplained gold is taxed at a flat 60% u/s 115BBE, with no exemptions or deductions.
On top of this, a 25% surcharge is added on the tax amount, and then a 4% cess is applied on the total.
So in total, the tax liability comes to around 78% on the value of the unexplained gold.
| Component | Calculation | Rate |
|---|---|---|
| Tax u/s 115BBE | Flat rate on the value of unexplained gold | 60% |
| Surcharge | 25% on the tax amount (60%×25%) | 15% |
| Tax + surcharge subtotal | 60% + 15% | 75% |
| Health & education cess | 4% on the subtotal (75%×4%) | 3% |
| Effective tax liability (approx.) | 60% + 15% + 3% | 78% |
Additionally, if the unexplained investment is discovered during assessment and you haven’t already disclosed it and paid the tax under 115BBE, a 10% penalty under section 271AAC may also apply.
For example,
If ₹10,00,000 worth of gold is treated as unexplained:
- Tax under 115BBE: ₹6,00,000
- Surcharge (25% of tax): ₹1,50,000
- Cess (4% of tax + surcharge): ₹30,000
Your total tax liability is ₹7,80,000, which is 78% of the gold’s value in taxes and penalties.
To conclude, don’t treat the 500/250/100 g limits as a hard maximum. The safest gold is always the amount you can fully document and legally justify.
What are your thoughts?