How Much Gold Can You Keep at Home- Limits & Income tax rules

Gold is a symbol of wealth that has been cherished for a very long time. It's a part of our customs and is believed to bring good luck during celebrations. We enjoy keeping gold in our homes, like coins or jewellery. However, as we appreciate its beauty, we also need to ensure it's safe and follow the laws of owning something valuable.

How much gold can you hold?

As outlined by the Central Board of Direct Taxes (CBDT), gold purchases made with declared income, exempted revenue (like agricultural income), "reasonable household savings," or legally inherited money obtained from explainable sources will not be subject to taxation. Furthermore, regulations dictate that officials cannot seize gold jewellery or ornaments during home searches if the quantity is below the established threshold.

In a family comprising a married woman, unmarried woman, married man, and single man, the permitted gold limits to avoid confiscation are defined as follows:

• a married female can possess up to 500 grams,
• an unmarried female up to 250 grams,
• a married male up to 100 grams, and
• an unmarried male up to 100 grams without facing the risk of confiscation.

While our fascination with gold remains strong, it's essential to be aware of the restrictions and the tax on gold jewellery holding. People often choose to invest in gold alongside mutual funds, SIPs, and equities, viewing it as a sound investment strategy. With more investment avenues, such as bonds, digital securities, and SGBs, investment in physical gold is still a preferred option.

How to check gold purity at home

To assess the purity of gold in the comfort of your home, you can employ common household items. Here are several methods to test gold at home for its purity:

Vinegar Test: Apply vinegar to the gold and observe any colour changes. Authentic gold will remain unaffected by vinegar.

Streak Test: Rub your gold against a jeweller's stone or ceramic plate, noting the resulting gold streak. Genuine gold will leave a distinct gold streak on these surfaces.

Water Test: Drop the gold into a container of water and observe whether it sinks. Genuine gold, being dense, will settle at the bottom.

Magnet Test: Hold a powerful magnet close to the gold and check for any attraction. Genuine gold lacks magnetic properties and will not be drawn to the magnet.

Skin Test: Monitor for discolourations on your skin or the gold caused by wearing or handling. Fake gold may tarnish or leave a greenish mark on your skin.

It's important to acknowledge that these tests are not foolproof and may not offer the same level of accuracy as professional testing methods. For more detailed information, you can refer to professional resources.

Different kinds of regulations governing different types of gold

Various regulations control different types of gold investments, affecting things like how much you're allowed to have and the taxes you might need to pay. It's important to fully understand these rules to make smart choices in the gold market.

Physical Gold

According to the recent CBDT circular, regardless of marital status, men are limited to owning a maximum of 100 grams of genuine gold as jewellery. In contrast, married women can possess up to 500 grams, unmarried women up to 250 grams, and men, in general, up to 500 grams. Selling physical gold within three years incurs a short-term capital gains tax; beyond that, a long-term capital gains tax applies. Short-term gains follow income tax slab rates, while long-term gains face a 20% tax plus a 4% cess and potential surcharge. Additionally, a 3% extra GST is charged on purchasing physical gold.

Digital Gold

Investing in digital gold often proves more lucrative than traditional gold, delivering superior returns on investment. The only charges linked to acquiring digital gold are the Goods and Services Tax (GST) on the purchase amount, along with nominal additional fees, contingent on the investment platform. While there is no ceiling on the cost of digital gold, daily spending is capped at 2 lakh rupees. Long-term capital gains tax of 20% plus cess and fees applies when selling digital gold after three years. However, returns on digital gold held for less than three years remain non-taxable until withdrawal.

Sovereign Gold Bonds

Sovereign Gold Bonds (SGBs) permit individuals to invest a maximum of 4 kg annually, excluding holdings used as collateral by banks and other financial institutions. The acquisition of sovereign gold bonds incurs no external costs, with no Goods and Services Tax (GST) requirement. SGBs accrue an annual interest of 2.5%, contributing to taxable income and taxed according to the applicable slab. Notably, after an eight-year period, profits from Sovereign Gold Bonds become tax-free.

Gold ETFs and Mutual Funds

Long-term capital gains (LTCG) are applicable to both mutual funds and gold ETFs when held for over three years. For investments held for less than three years, the rate remains consistent at 20%, plus a 4% cess, with gains added to taxable income and taxed according to the individual's income tax slab. It's crucial to note that expenses, minimum and maximum limits, as well as tenures, differ among various gold investment products. Therefore, diligent research is essential before making any investment decisions.

Conclusion

Navigating the world of gold investment requires an understanding of its variations across different types. Conducting in-depth research and analysis is essential for informed decisions, ensuring that you choose the right gold investment strategy for your financial goals.

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FAQs

Q1. Can I keep gold bars at home?

Ans. Yes, absolutely! You can keep gold bars at your home, and there is no limit on how many bars you keep. Many people prefer to keep physical gold, in the form of gold bars or coins, at their homes as part of their investment portfolio. However, you will have to provide details or a valid explanation about the source of income that allowed you to buy the gold bars in the event of an income tax investigation. Remember that there are limits on the amount of unaccountable gold items to be kept at home without any sort of tax trouble. You will also have to consider security measures such as a safe deposit locker or a secure storage facility so that your valuable possessions stay protected.

Q2. Can I sell a gold bar without a bill? 

Ans. Yes, you can sell your gold bars without a bill to an established jeweller, but in most cases, the jeweller will expect you to make another gold purchase from their shop in exchange for the gold bar. They will melt the gold bar right in front of you to determine the actual weight and purity of the gold bar.