The ₹1 Crore Gold Loophole: India’s Undocumented Wealth Secret
There’s a quiet tax loophole in India that’s allowing households to legally stash away significant wealth in gold without any questions asked. An outdated rule from 1994, which hasn’t been updated despite the exponential rise in gold prices, is creating a perfect storm for potential tax evasion and the parking of black money.
Investment banker Sarthak Ahuja recently brought this to light, highlighting a Central Board of Direct Taxes (CBDT) directive that dictates how much gold an individual can hold without proof of purchase during a tax raid. The limits are:
- Married Woman: 500 grams
- Unmarried Woman: 250 grams
- Men: 100 grams
When these limits were set in 1994, a kilogram of gold was valued at less than ₹5 lakh. Today, that same kilogram fetches nearly ₹87 lakh! This means that under the current rules, individuals can hold gold worth up to a whopping ₹1 crore without needing to explain where the money came from.
Ahuja points out the startling discrepancy: “That’s over 10% annual return, which is not the rate at which people’s incomes or savings in gold have increased over this thirty-year period.” This disproportionate growth makes gold an attractive haven for undisclosed income.
During a tax raid, officials typically have broad powers to demand receipts for assets. However, this specific gold allowance acts as a shield. “This is where things get interesting,” Ahuja explains. “As gold prices increase, people with undisclosed incomes park such incomes into gold… you can buy worth ₹1 crore without having to give any explanation.”
Despite the clear implications for tax evasion and the rapid appreciation of gold, the CBDT has yet to revise these outdated limits. Experts are now warning that this loophole is effectively creating a legal shelter for high-value, undocumented wealth. The call for reform is growing louder, with suggestions that future revisions might even include lowering exemptions for women married after a certain date.
What are your thoughts on this decades-old tax guideline in today’s economy?