Investments in Gold & Proposed Income Tax Law

GAURAV KANSAL 07:52 Gold , Gold Ban , gold deposits , Income tax , slider No comments

Your gold is safe. 500 grams per married woman will not be seized

During search operations, conducted by I-T Department, there would be no seizure of gold jewellery and ornaments to the extent of 500 grams per married women, 250 grams per unmarried women as also 100 grams per male member of the family, it said.

Highlights

· 1 Married women can keep 500 grams at home.

· 2 250 grams per unmarried women is allowed.

· 3 Per male member of the family is allowed to keep 100 grams.

Details

Amendments to the I-T laws do not seek to tax inherited gold and jewellery as also those items that are purchased through disclosed or agriculture income, the government said today.

The Lok Sabha earlier this week passed the Taxation Laws (Second Amendment) Bill, which proposes a steep up to 85 per cent tax and penalty on undisclosed wealth that is discovered by tax authorities during search and seizure.

Dispelling rumours that jewellery would be covered under the amended law, the Central Board of Direct Taxes (CBDT) said the government has not introduced any new provision regarding chargeability of tax on jewellery.

"The jewellery/gold purchased out of disclosed income or out of exempted income like agricultural income or out of reasonable household savings or legally inherited which has been acquired out of explained sources is neither chargeable to tax under the existing provisions nor under the proposed amended provisions," the CBDT said.

NO SEIZURE OF GOLD FROM MARRIED WOMEN

During search operations, conducted by I-T Department, there would be no seizure of gold jewellery and ornaments to the extent of 500 grams per married women, 250 gm per unmarried women as also 100 gm per male member of the family, it said.

"Further, legitimate holding of jewellery up to any extent is fully protected," it added.

The Bill, which is currently under consideration of the Rajya Sabha, will amend Section 115BBE of the Income Tax Act to provide for a steep 60 per cent tax and a 25 per cent surcharge on it (total 75 per cent) for black money holders.

Another section inserted provides for an additional 10 per cent penalty on being established that the undeclared wealth is unaccounted or black money, taking the total incidence of levies to 85 per cent.

CBDT said: "Tax rate under section 115BBE is proposed to be increased only for unexplained income as there were reports that the tax evaders are trying to include their undisclosed income in the return of income as business income or income from other sources.

"The provisions of section 115BBE apply mainly in those cases where assets or cash etc. are sought to be declared as 'unexplained cash or asset' or where it is hidden as unsubstantiated business income, and the Assessing Officer detects it as such."

PENALTY

The Bill also proposes to raise penalty under I-T Act for search and seizure cases by 3-fold to 30 per cent, a move aimed at deterring black money holders, from 10 or 20 per cent currently.

Once the amendments are approved by Parliament, there would be a penalty of 30 per cent of unaccounted income, if admitted and taxes are paid. This would take the total incidence of tax and penalty to 60 per cent.

While proposing to amend Section 271AAB, the government has decided to retain the provision of levying penalty of 60 per cent of income in "any other cases". That would raise the incidence of tax and penalty to 90 per cent.

During 2015-16, the I-T Department conducted 445 searches which discovered undisclosed income of Rs 11,066 crore. Total assets seized were Rs 712.68 crore.

Also 545 searches conducted in 2014-15 have led to admission of undisclosed income worth Rs 10,288 crore. Total assets seized amounted to Rs 761.70 crore.

Besides, 569 searches in 2013-14 saw admission of undisclosed income of Rs 10,791.63 crore and asset seizure of Rs 807.84 crore.

This took the total undisclosed income which was admitted during searches to Rs 32,146 crore.

Search and seizure operations are conducted by the tax department when the Assessing Officer believes that the assessee is unlikely to produce books of accounts or likely to suppress books of account and other documents which may be useful and relevant to an income tax proceedings.

GOVERNMENT CLARIFICATION

Government clarifies that the apprehension sought to be created that the jewellery with the household which is acquired-out of disclosed sources or exempted income shall become taxable under the proposed Taxation Laws (Second Amendment) Bill, 2016, is totally unfounded and baseless.

In the wake of Taxation Laws (Second Amendment) Bill, 2016 which has been passed by the Lok Sabha and is under consideration with Rajya Sabha, some rumours have been making rounds that all gold jewellery including ancestral jewellery shall be taxed @75 per cent plus cess with a further penalty liability of 10 per cent of tax payable.

It is hereby clarified that the above Bill has not introduced any new provision regarding chargeability of tax on jewellery. The Bill only seeks to enhance the applicable tax rate under section 115BBE of the Income-tax Act, 1961 (the Act) from existing 30 per cent to 60 per cent plus surcharge of 25 per cent and cess thereon. This section only provides rate of tax to be charged in case of unexplained investment in assets. The chargeability of these assets as income is governed by the provisions of section 69, 69A & 69B which are part of the Act since 1960s.

The Bill does not seek to amend the provisions of these sections. Tax rate under section 115BBE is proposed to be increased only for unexplained income as there were reports that the tax evaders are trying to include their undisclosed income in the return of income as business income or income from other sources. The provisions of section 115BBE apply mainly in those cases where assets or cash etc. are sought to be declared as 'unexplained cash or asset' or where it is hidden as unsubstantiated business income, and the Assessing Officer detects it as such.

It is clarified that the jewellery/gold purchased out of disclosed income or out of exempted income like agricultural income or out of reasonable household savings or legally inherited which has been acquired out of explained sources is neither chargeable to tax under the existing provisions nor under the proposed amended provisions. In this connection, a reference to instruction No.1916 is also invited which provides that during the search operations, no seizure of gold jewellery and ornaments to the extent of 500 grams per married lady, 250 grams per unmarried lady and 100 grams per male member of the family shall be made. Further, legitimate holding of jewellery upto any extent is fully protected.

In view of the above, the apprehension sought to be created that the jewellery with the household which is acquired out of disclosed sources or exempted income shall become taxable under the proposed amendment is totally unfounded and baseless.

With PTI inputs