Gold Storage Limits and Taxation in India: A Comprehensive Guide (Updated 2025)

 

Gold Storage Limits and Taxation in India: A Comprehensive Guide (Updated 2025)

Gold remains a cornerstone of Indian investment and cultural significance. However, navigating the regulations surrounding gold ownership and taxation requires ongoing diligence. This guide provides an overview of current limits, documentation requirements, and tax implications for gold holdings in India, reflecting updates as of 2025.

Gold Storage in India – Current Landscape

Following the abolition of the Gold Control Act in 1990, India no longer imposes legal limits on the amount of gold an individual can own. The Central Board of Direct Taxes (CBDT) continues to issue guidelines, primarily through Instruction No. 1916 dated May 11, 1994, which establishes permissible limits for gold jewelry holdings. Recent clarifications and interpretations by the Income Tax Department have further shaped this landscape.

Permissible Gold Jewelry Holdings (as of 2025)

These limits are intended to facilitate easier tracking and reporting for tax authorities.

Married Female: 500 grams

Unmarried Female: 250 grams

Married Male: 100 grams

Unmarried Male: 100 grams

It’s crucial to note that these limits apply to jewelry only. Gold held in other forms (bullion, ETFs, mutual funds) is subject to different tax rules (detailed below). The total permissible quantity includes both purchased and inherited gold.

Documentation – A Critical Component

While there’s no legal requirement to declare gold holdings below the permissible limits, maintaining meticulous documentation is essential to demonstrate ownership and justify holdings during tax audits. Key documents include:

Purchase Invoice: A detailed receipt from a reputable jeweler, including the gold’s weight, purity (fineness), and price.

Bank Transaction Records: Proof of payment, such as bank statements or transaction slips, is vital for purchases made through banking channels.

Inheritance Proof: Documents like wills, family settlement agreements, ancestral receipts, or probate records are necessary to establish inheritance.

Gift Deed: A properly executed gift deed, along with the original purchase invoice in the donor’s name, provides evidence of a gift.

Valuation Certificate: For inherited gold, a valuation certificate from an Assaying and Refining Laboratory (ARL) is highly recommended.

Digital Gold Transaction Records: For gold held in digital form (tokens on blockchain platforms), retain records of purchase, transfer, and sale transactions.

Taxation on Gold Jewelry Holdings & Investments

Seizure of Gold During a Tax Raid:

Gold jewelry held within the permissible limits (as outlined above) will generally not be seized during a tax raid, even without supporting documentation.

If holdings exceed these limits, the tax officer retains discretion to exempt additional gold based on factors like family customs, social status, and the overall financial situation.

Unaccounted-for gold, regardless of quantity, is subject to confiscation and taxation.

Taxation of Gold Investments (Beyond Jewelry):

The tax treatment of gold held in bullion, ETFs, or mutual funds differs significantly from jewelry.

Gifting of Gold: As per Section 64(2) of the Income Tax Act, if the value of gifted gold exceeds ₹50,000 in a financial year, the recipient is liable to pay tax. However, exemptions apply if the gift is received from immediate family members (spouse, parents, siblings, or children) or on special occasions like marriage. The recipient must declare the gift in their income tax return.

Tax on Digital Gold: The taxation of digital gold has become increasingly complex. The CBDT has issued clarifications stating that digital gold is treated as ‘plantable securities’ under Section 115F of the Income Tax Act. This means that gains from the sale of digital gold are taxed at 20% plus applicable surcharge and cess, with indexation benefits. However, the interpretation of "transfer" within the context of digital gold transactions remains a subject of ongoing debate and potential litigation.

Capital Gains Tax on Sale of Gold:

Short-Term Capital Gains (STCG): Profit from selling gold held for less than 36 months is taxed at the individual’s applicable income tax slab rate.

Long-Term Capital Gains (LTCG): Profit from selling gold held for more than 36 months is taxed at 20% plus applicable surcharge and cess, with indexation benefits.

Goods and Services Tax (GST):

Purchase of Gold: 3% GST is levied on the purchase of gold.

Making Charges: 5% GST is applied to the making charges of jewelry.

Exchange of Old Gold: GST is charged only on the additional value of the new gold, not on the traded quantity.

Recent CBDT Clarifications & Developments (2024-2025)

Clarification on Digital Gold "Transfer": The CBDT issued a circular in late 2024 clarifying that a "transfer" of digital gold involves the transfer of the token itself, not the underlying gold. This has implications for determining the holding period for LTCG purposes.

Increased Scrutiny on Gold Transactions: Tax authorities have indicated an increased focus on verifying the source of gold transactions, particularly for high-value purchases.

Emphasis on KYC Compliance: Strict adherence to Know Your Customer (KYC) norms is now mandatory for all gold transactions, including digital gold.

Tax Relief – Section 54F of the Income Tax Act

Section 54F remains a valuable avenue for reducing LTCG tax liability. It allows investors to reinvest the proceeds from the sale of gold into a residential property. Key conditions include:

The property must be purchased within one year before or two years after the sale of gold.

Construction, if undertaken, must be completed within three years from the sale date.

The seller cannot own more than one other residential property at the time of the gold sale.

If the newly acquired property is sold within three years, the previously exempted capital gain will be taxable.

Important Considerations & Recent Updates

Joint Lockers: The permissible limits apply to each individual contributor to a joint locker. Registering the locker in the names of all contributors minimizes potential disputes.

Blockchain Technology & Gold: The increasing use of blockchain technology in gold trading necessitates careful record-keeping and compliance with evolving regulations.

Tax Litigation: Several cases involving gold taxation are currently pending before the Income Tax Appellate Tribunal (ITAT) and the Supreme Court, which could potentially lead to further clarifications and changes in tax law.