Weddings in India witness a lot of gold gifting. Apart from gold being gifted by parents, other relatives and in-laws shower the bride with gold. The question is: How is the gift of gold taxed.
Tax lens
Usually, any money or property received by anyone without any consideration is taxed and needs to be filled as “income from other sources” in the income tax returns.
But the good news is that all the gold received during marriage is tax free. “Any gift received during marriage is tax free and so the gold received by a bride in marriage is not taxed. Further, there is no restriction on gold being received during marriage,” says Sujit Bangar, Founder, Taxbuddy.com.
This could be in the form of ornaments, articles, utensils, set in furniture etc. Streedhan received by a lady on the occasion of marriage is not subject to tax, as per Section 56(2)(x) of the Income Tax Act.
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Gold offered by any relative, distant or even friends, during marriage isn’t taxed in the hands of the bride or the groom. But is the taxation any different when gold is handed over after the occasion of marriage? Well, it will be tax-free only if select people give it you.
“Apart from marriage, gold received as a gift by a woman is exempt from tax only if received from her husband, brother, sister or her and her husband’s parents or lineal ascendant or descendent ,” says Suresh Surana, Founder, RSM India.
How much is too much?
Many hand over their family jewels to the newlyweds during the marriage as an inheritance. The taxmen cannot restrict possession of gold jewellery or ornaments, as long as they are acquired from sources that can be explained. To be sure, the bride could have received gold during her wedding or may have acquired it later or even inherited it through her marriage.
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If the taxman comes knocking, the bride must explain how she got the gold, if she is found to hold gold disproportionate to her income. For instance, if she has inherited the gold, then a copy of the Will or a gift deed would have to be produced.
But, if you have no proof or cannot explain the sources, then certain restrictions are laid in terms of gold possessed by individuals in India. A married woman can hold up to 500 grams, while an unmarried woman can possess up to 250 grams. A man can have up to 100 grams of gold without any proof or documentation of the source.
Raids and seizures
However, if one has unexplained gold jewellery in excess of the above mentioned limits, then it could be confiscated if there is an income tax seizure or raid. If the taxpayer doesn’t offer a reasonable explanation about the money used to invest in gold, then it is taxed.
“If taxpayers can provide a reasonable explanation about the source of income for making investments in gold to the satisfaction of the income tax authorities, then they may decide not to seize such gold jewellery. Such a reasonable explanation needs to be backed by evidence and proof in the form of tax invoices, gift deeds, family settlement deed etc,” says Surana.
The Income Tax officers may take into account several factors such as the family’s social status, customs and traditions in order to determine the validity of evidence and statements provided by the taxpayer.
But if it is seized and taxed, then steep tax rates are applicable on such unexplained gold. “The amount is taxable at 60 percent + 25 percent surcharge and 4 percent health and education cess, apart from 10% penalty on the tax,” says Surana.
However, there are places where gold cannot be taken away. For instance, if households don’t pay their annual property tax by December 31, the Brihanmumbai Municipal Corporation (BMC), can seize everything including property, air-conditioners, and belongings, but not the streedhan gifted to a woman at her marriage.
Declaration during tax return filings
To be safe, one should keep pictures or other documents, including gift deeds, to support a claim if one has too much gold or has been gifted the same at the time of marrying.
“The donor should have disclosed this gold in regular tax filings. As an abundant precaution, documentary evidence in the form of photographs or any other relevant documents may be kept ready for reference,” suggests Bangar. This mandatory disclosure of your gold holdings must be disclosed every year during income-tax filing, if your income is more than Rs 50 lakh.
You can even declare your gold holdings in the income tax return. Those earning more than Rs 50 lakh per annum need to declare their jewellery and bullion in Schedule AL (Assets and Liabilities) in the income tax return. “Precious metals and jewellery can be declared in ‘Details of movable assets’ held at the end of the relevant financial year,” says Surana.
Even gems, stones and metals sewn into apparel or set in furniture or another article needs to be declared. But pricing these could be tricky as precious metal prices keep fluctuating. The price of gold was Rs 6,262 per gram as on December 19, 2023.
“Gold needs to be disclosed at cost price. If such gold is received or acquired by way of a gift or will, then one needs to declare the cost provided by the previous owner (if your income is more than Rs 50 lakh a year). If the amount is not ascertainable, the value can be estimated as per the fair market value on the acquisition date,” recommends Surana.That is why it is better to keep proof; the year in which you were gifted gold or inherited it or bought it.
In case the marriage takes a sour turn, and the couple decides to part ways, gold ornaments will still remain out of the reach of the taxman. “There is no tax implication of divorce on streedhan or gold received during marriage,” says Bangar.
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