Regulations Governing Home Gold Holdings

India's Growing Gold Appetite Tests Foreign Exchange Reserves

India's increasing demand for gold has raised concerns about the strain it may be putting on the country's foreign exchange reserves. In a recent speech, Prime Minister Modi urged Indians to avoid buying gold for the next year, citing the potential to save substantial foreign exchange.

However, the question remains: how much gold can an individual legally hold? While there is no specific statutory limit under the Income-tax Act, 2025, on the quantity of gold that an individual can hold at home, the Income-tax framework becomes relevant from a disclosure and source-explanation perspective.

The Central Board of Direct Taxes (CBDT) has laid down guidelines for seizure of jewellery during search operations under Section 132 of the IT Act, 1961 (now replaced by Section 247 of the IT Act, 2025). As per Instruction No. 1916 dated May 11, 1994, gold jewellery and ornaments to the extent of:

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shall not be seized, even if prima facie unexplained. It is essential to note that this is not a limit on ownership, but merely a threshold for non-seizure during search proceedings.

The Ministry of Finance has clarified that there is no restriction on holding gold if the source of acquisition can be substantiated. Taxpayers can retain gold in excess of the above limits, provided they can satisfactorily explain the source of acquisition, such as inheritance or gifts (including those received on marriage).

In the absence of a satisfactory explanation, the value of such gold may be treated as unexplained investment under Section 104 of the IT Act, 2025, and taxed accordingly. Taxpayers should ensure that adequate documentation or a reasonable explanation is available to substantiate the source of such holdings, especially in the context of search or scrutiny proceedings under the Income-tax law.

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In cases where an individual's total income exceeds Rs 1 crore during FY 2025–26, details of such holdings are required to be disclosed under Schedule AL (Assets and Liabilities) in the Income Tax Return.