Looking for expert help with tax on gold you hold, buy or sell? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
Key Takeaways
- No law limits how much gold you can keep at home. The Ministry of Finance said so in a press release dated 1 December 2016, as long as the gold comes from explained sources, including inheritance.
- The 500 g, 250 g and 100 g figures are from a CBDT instruction of 11 May 1994. They are the quantities of jewellery that officers do not seize in a search. They aren't an ownership cap.
- PAN is needed for a jewellery bill above Rs 2 lakh (Rule 159, Income-tax Rules, 2026). Cash of Rs 2 lakh or more can't be accepted by the jeweller (Section 186, Income-tax Act, 2025).
- GST on ready-made jewellery is 3% on the full value, making charges included.
- Gold sold after more than 24 months is taxed at 12.5% without indexation. Sold earlier, the gain is taxed at your slab rate.
How much gold can you keep at home in India? As much as you can explain. There is no legal limit on holding gold jewellery or ornaments acquired from explained sources of income, including inheritance. Separately, during an income tax search, officers do not seize jewellery up to 500 g for a married woman, 250 g for an unmarried woman and 100 g for a male member of the family.
Diwali falls on 8 November 2026, with Dhanteras just before it and the wedding season right after. A lot of families will buy gold in these weeks, and the same question comes up every year: is there a limit on how much gold you can keep at home?
There isn't. What exists is a guideline on how much jewellery tax officers leave alone during a search, plus a few rules on PAN, cash and GST that apply when you buy. This guide covers each of them, and what to keep on file for gold you inherited or received as a gift.
A note on section numbers. The Income-tax Act, 2025 applies from 1 April 2026. Section numbers below are from the new Act, with the old 1961 Act number in brackets.
Is there a legal limit on gold at home?
No. On 1 December 2016 the Ministry of Finance issued a press release to clear up this exact doubt. It says:
- There is no limit on holding gold jewellery or ornaments by anybody, provided it is acquired from explained sources of income, including inheritance.
- Under instructions issued on 11 May 1994 on search and seizure, jewellery and ornaments up to certain quantities will not be seized, even if, at first look, they don't seem to match the person's income record.
- The officer conducting the search has discretion not to seize an even higher quantity, based on factors including family customs and traditions.
So the law doesn't ask "how many grams do you have?". It asks "can you show where it came from?".
The 500 g, 250 g and 100 g guideline
The quantities come from CBDT Instruction No. 1916 dated 11 May 1994.
| Family member | Jewellery and ornaments not seized in a search |
|---|---|
| Married woman | 500 grams |
| Unmarried woman | 250 grams |
| Male member | 100 grams |
Example: a family of four has a husband, a wife, an unmarried daughter and a son. The quantity that would not be seized is 100 + 500 + 250 + 100 = 950 grams.
Four points people usually miss:
- It is about seizure, not ownership. A family holding 2 kg with invoices and inheritance papers is on the right side of the law. The guideline only says what officers leave behind when they can't immediately match jewellery to the income record.
- It speaks of jewellery and ornaments. The press release doesn't mention gold bars, coins or bullion.
- It applies per person. The quantities are for each married woman, unmarried woman and male member of the family.
- Home or locker makes no difference. What matters is whether you can explain the source, not where the jewellery is kept.
The guideline deals with seizure. It doesn't say that jewellery within these quantities needs no explanation in the assessment that follows, so keep your records even if your holding is small.
What if you can't explain the gold?
This is where the real risk sits.
The presumption. When jewellery is found in someone's possession or control during a search, it may be presumed to belong to that person (Section 247(7) and Section 524 of the Income-tax Act, 2025; old Sections 132(4A) and 292C). The person who says "this belongs to my sister" or "this is my late mother's" needs papers to back it.
The deeming rule. Under Section 104 (old Section 69A), where a person is found to own an asset that isn't recorded in the books, and offers no explanation of its nature and source, or an explanation the Assessing Officer doesn't find satisfactory, the value of the asset is deemed to be income. "Asset" here includes money, bullion and jewellery.
The tax.
| Situation | How the unexplained jewellery is taxed |
|---|---|
| Found in a search | Assessed as undisclosed income of the block period (Sections 292 to 294) and taxed at 60% under Section 192, plus any surcharge |
| Other cases, such as a regular assessment | Taxed at a flat 30% under Section 195 from tax year 2026-27, with no deduction or set-off of losses |
Two things to note on the second row. The Finance Act, 2026 cut the Section 195 rate from 60% to 30% from 1 April 2026. And where the income is determined by the Assessing Officer and wasn't offered in the return, it counts as misreporting, for which the penalty is 200% of the tax on that income (Section 439).
An invoice and a bank entry cost nothing to keep. Not having them can cost more than the jewellery is worth.
Buying gold this Diwali: PAN above Rs 2 lakh
Rule 159 of the Income-tax Rules, 2026 (old Rule 114B) lists the transactions where PAN has to be quoted. Serial number 16 covers the sale or purchase of goods or services of any nature for an amount exceeding Rs 2,00,000 per transaction. Jewellery falls here.
| Jewellery bill | PAN needed? |
|---|---|
| Rs 2,00,000 or less | No |
| More than Rs 2,00,000 | Yes |
If you don't have a PAN, you can still buy. An individual without a PAN gives the jeweller a declaration in Form No. 97, which does the job Form 60 did under the old rules. This option isn't available to companies and firms.
The rule applies whether you pay in cash, by card or by UPI. It is about the bill value, not the mode of payment.
Cash limit: stay below Rs 2 lakh
Section 186 of the Income-tax Act, 2025 (old Section 269ST) says no person shall receive Rs 2 lakh or more in cash:
- in aggregate from a person in a day, or
- in respect of a single transaction, or
- in respect of transactions relating to one event or occasion from a person.
| How you pay | Limit |
|---|---|
| Cash | Less than Rs 2,00,000 |
| Account payee cheque or bank draft, bank transfer, UPI, card | No limit under this section |
The penalty under Section 451 (old Section 271DA) equals the amount received, and it is imposed on the receiver. For a Rs 2.5 lakh cash sale the jeweller risks a penalty of Rs 2.5 lakh, which is why a jeweller will refuse the cash.
Splitting the bill doesn't help. Two bills of Rs 1.5 lakh each for the same necklace are one transaction, and wedding jewellery bought across several days from the same buyer can be treated as relating to one occasion. Our cash transaction limits guide has more examples.
Paying through the bank also helps you later. The bank entry is your proof of source if anyone asks how the jewellery was bought.
GST on gold: 3% on the full bill
Gold, gold jewellery and gold coins are in Schedule IV of Notification No. 9/2025-Central Tax (Rate), which carries 1.5% CGST plus 1.5% SGST, so 3% in all.
Many people believe that making charges attract 5%. For ready-made jewellery, they don't. The CBIC sector FAQ on gems and jewellery takes this exact case, a gold chain with a gold value and a separate making charge, and answers that GST is payable at 3% of the total transaction value of jewellery, whether the making charge is shown separately or not.
The 5% in the same FAQ is for something else: the job charges a job worker bills to a jeweller who gave him gold to work on. It isn't the rate for the making charge line on your retail bill.
Example (gold price assumed at Rs 12,000 per gram for illustration):
| Particulars | Amount (Rs) |
|---|---|
| Gold value (20 g x Rs 12,000) | 2,40,000 |
| Making charges | 24,000 |
| Taxable value | 2,64,000 |
| GST at 3% | 7,920 |
| Invoice total | 2,71,920 |
This bill is above Rs 2 lakh, so the jeweller will ask for PAN, and you can't settle it in cash. For HSN codes, old gold exchange and jewellers' input tax credit, see our GST on gold and jewellery guide.
Inherited and gifted gold
Is it taxed when you receive it? Under Section 92 of the Income-tax Act, 2025 (old Section 56(2)(x)), property received without consideration is taxed as income from other sources when its fair market value exceeds Rs 50,000. The section doesn't apply to money or property received:
- from a relative,
- on the occasion of the marriage of the individual,
- under a will or by way of inheritance.
So gold from your parents, wedding gifts, and jewellery that came to you under a will aren't taxed on receipt. Gold from a friend or other non-relative on any other occasion is taxable if the total value in the year crosses Rs 50,000. Our gift tax guide lists who counts as a relative.
What to keep on file. Inherited jewellery rarely comes with a bill. These papers do the same job:
| Document | What it shows |
|---|---|
| Will, succession certificate or legal heir certificate | That the jewellery came to you by inheritance |
| Family settlement or partition record | How the family jewellery was divided |
| Old purchase invoices, if any | Original owner, weight and cost |
| Old wealth-tax returns and valuation reports of the previous owner | That the family held the jewellery years ago |
| Gift deed or a signed gift letter | Who gave the jewellery, when, and on what occasion |
| Wedding records such as a list of gifts and photographs | That jewellery was received at the marriage |
| Registered valuer's report | Weight, purity and value as on a given date |
No single paper is compulsory. The aim is to show how the jewellery came to you. For more on inherited assets, see our inheritance tax guide.
Selling gold: capital gains tax
Tax comes in when you sell or exchange the gold.
| Held for | Type of gain | Tax |
|---|---|---|
| 24 months or less | Short-term | At your slab rate |
| More than 24 months | Long-term | 12.5%, without indexation (Section 197; old Section 112) |
The 24-month period is in the definition of short-term capital asset in Section 2(101) of the Income-tax Act, 2025. The shorter 12-month period there is only for listed securities and a few other units, not for physical gold.
For inherited or gifted gold, two rules work in your favour:
- Cost. Your cost is the cost at which the previous owner acquired it (Section 73; old Section 49(1)). If the previous owner got it before 1 April 2001, you can choose the fair market value on 1 April 2001 instead (Section 90; old Section 55).
- Holding period. The time the previous owner held it is added to yours (Section 2(101)).
Example: you inherited an 80 g chain that your grandmother bought in the 1980s. You sell it in November 2026 for Rs 9,60,000. Assume a registered valuer puts its value on 1 April 2001 at Rs 36,000, and that your other income is above the basic exemption limit and your total income is below Rs 50 lakh.
| Particulars | Amount (Rs) |
|---|---|
| Sale price | 9,60,000 |
| Less: cost (fair market value on 1 April 2001) | 36,000 |
| Long-term capital gain | 9,24,000 |
| Tax at 12.5% | 1,15,500 |
| Health and education cess at 4% | 4,620 |
| Total tax | 1,20,120 |
Exchanging old jewellery for new at a jeweller is also a sale of the old gold. Our guide on income tax on sale of gold and jewellery covers exchanges, gold ETFs, sovereign gold bonds and the exemption for reinvesting in a house.
Common mistakes
- Treating 500 g as a legal limit. It isn't. You don't have to sell or "declare" anything above it. You only need to be able to explain it.
- Treating 500 g as full protection. The guideline is about seizure in a search. Keep your papers anyway.
- Splitting bills to stay under Rs 2 lakh. The PAN rule is per transaction, and the cash rule also covers a day and an occasion.
- Paying in cash and throwing away the bill. Five years later the bill and the bank entry are the only proof of source.
- Assuming 12 months makes gold long-term. For physical gold it is more than 24 months.
- Not reporting the sale of inherited gold. Receiving it is tax-free. Selling it isn't.
How Tax Garden helps
We work out the capital gain when you sell or exchange gold, including the 1 April 2001 value for old family jewellery, and report it in the right schedule through our ITR filing service. If you get a notice asking about the source of jewellery or a large purchase, we help you put the papers together and draft the reply. Our income tax notice guide explains the notice types. See pricing for plans.
Sources: Ministry of Finance press release dated 1 December 2016 on gold jewellery and ornaments (Press Information Bureau); CBDT Instruction No. 1916 dated 11 May 1994; Income-tax Act, 2025 as amended by the Finance Act, 2026 (Sections 2(101), 73, 90, 92, 104, 186, 192, 195, 197, 247, 262, 292 to 294, 439, 451 and 524); Income-tax Rules, 2026 (Rule 159 and Form No. 97); Memorandum explaining the Finance Bill, 2026; Notification No. 9/2025-Central Tax (Rate) dated 17 September 2025; CBIC sectoral FAQ on Gems and Jewellery. Position as of 6 October 2026. This article is general information and not a substitute for advice on your own facts.
Frequently Asked Questions
Is there a legal limit on how much gold I can keep at home?
No. The Ministry of Finance clarified on 1 December 2016 that there is no limit on holding gold jewellery or ornaments, provided they are acquired from explained sources of income, including inheritance. The 500 g, 250 g and 100 g figures are quantities that officers do not seize during an income tax search. They are not a cap on ownership.
What are the 500 g, 250 g and 100 g gold limits?
They come from a CBDT instruction dated 11 May 1994 on search and seizure. Jewellery and ornaments up to 500 g for a married woman, 250 g for an unmarried woman and 100 g for a male member of the family are not seized in a search, even if they do not appear to match the income record. The officer can also leave a larger quantity, looking at family customs and traditions.
What happens if I have more gold than the guideline quantity?
Nothing, as long as you can explain where it came from. Purchase invoices, bank payment records, a will, family settlement papers and gift deeds are the usual evidence. If jewellery cannot be explained, its value can be treated as your income. In a search case the undisclosed income of the block period is taxed at 60% under Section 192 of the Income-tax Act, 2025.
Do I need PAN to buy gold jewellery?
Yes, if the bill is more than Rs 2 lakh. Rule 159 of the Income-tax Rules, 2026 requires PAN for any sale or purchase of goods or services above Rs 2,00,000 per transaction. An individual who does not have a PAN gives the jeweller a declaration in Form No. 97 instead.
Can I pay Rs 2 lakh in cash for gold?
No. Section 186 of the Income-tax Act, 2025 (old Section 269ST) bars any person from receiving Rs 2 lakh or more in cash from one person in a day, for a single transaction, or for transactions relating to one event or occasion. The penalty under Section 451 equals the cash received and is imposed on the receiver, so a jeweller will not accept it. Cash has to stay below Rs 2 lakh.
Is GST on making charges 5%?
Not on ready-made jewellery. The CBIC sector FAQ on gems and jewellery says GST is payable at 3% on the total transaction value of jewellery, whether the making charge is shown separately or not. The 5% rate in the same FAQ is for job charges that a job worker bills to a jeweller.
Is inherited gold taxable?
Not when you receive it. Property received under a will or by way of inheritance is outside the gift provisions of Section 92 of the Income-tax Act, 2025 (old Section 56(2)(x)). Tax arises only when you sell. The previous owner's cost and holding period are counted, and long-term gains are taxed at 12.5% without indexation.
How is the sale of gold jewellery taxed in 2026?
Physical gold held for more than 24 months is a long-term capital asset, and the gain is taxed at 12.5% without indexation under Section 197 of the Income-tax Act, 2025. If you held it for 24 months or less, the gain is short-term and taxed at your slab rate.
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