Centre plans gold amnesty scheme soon

New Delhi/Chennai: In a move that is going to cause a lot of heartache to individuals, the government is all set to announce a new gold amnesty scheme wherein individuals will have to disclose their unaccounted gold holdings and pay taxes on the value that falls beyond a certain threshold. Gold jewellery of married women worth a certain amount will be exempted from this scheme.

A top source told The Asian Age, “The government at the Centre is mulling a special scheme on gold which aims at legalising unaccounted wealth in India’s most consumed asset — yellow metal. We have learnt that the Prime Minister’s Office (PMO), in consultation with the finance ministry, will finalise the scheme soon.”

“The tax will have to be paid on the entire value of gold declared by an individual that has been purchased without any receipt,” it said, adding that the scheme will be in line with other “amnesty” schemes floated during 2014-16.

The rate of tax is yet to be worked out by the government, a source said, but hinted that the thinking is to keep the rate around 30 per cent level, with an effective rate of 33 per cent, including education cess.

The gold amnesty scheme is the latest move by the government to bring back hordes of black money used to buy the yellow metal considered a safe investment option in India. After demonetisation in November 2016, this will be the second major measure by the government  to curb black economy.

“The new scheme is being considered as yet another attempt to unearth lakhs of crores of black money still lying in the system in the form of unaccounted gold,” the source said.

The proposed scheme, believed to have been prepared jointly by the department of economic affairs and the department of revenue under the finance ministry, will be implemented in this financial year itself.

What the threshold will be hasn’t yet been decided, and that task is likely to fall on a special “gold board” that will be step up by the government with representatives from both the government and private sector soon.

Once implemented, the government is likely to impose heavy penalties on those who hold unaccounted wealth in the form of gold beyond the prescribed limit.

“The finance ministry will form a gold board shortly and the broad will announce the scheme, asking that individuals disclose unaccounted gold beyond a certain threshold and pay taxes on the disclosed value. This holding limit will be fixed under the scheme. Once the scheme is closed, heavy fines will be imposed on those holding unaccounted gold beyond the prescribed limit,” the source said.

When asked about the prescribed threshold limit, the source did not disclose it but said that the final call will be taken by the gold board in this regard. “The government-approved valuer will certify the value of gold and action will be taken accordingly. However, gold jewellery of married women below a certain amount will be exempted from this scheme,” the source added.

Industry experts, however, reject the possibility of introducing such a scheme. “Such rumours have been doing rounds through social media and elsewhere for some time. But the government cannot bring out any such amnesty scheme for unaccounted gold,” said P.R. Somasundaram, managing director, India, World Gold Council.

“Why would individuals reveal the quantum of gold held by them? Gold is not in circulation and the government does not have any account of the gold held by individuals. Why should individuals reveal their holdings and pay tax?” he asked.

Industry bodies, including the World Gold Council, had recommended an amnesty scheme for the gold monetisation, under which the depositor was not to be asked questions about the source of gold. “This was intended to bring out the idle gold lying with individuals, households and institutions and make them productive. This will also lower the import burden of gold,” an industry source said.

“The government was working on a Gold Policy before the end of its last tenure. It consulted with the industry as well. However, as elections got nearer, the announcement of Gold Policy was postponed. Post elections, government has been busy addressing various other issues plaguing the economy and hence Gold Policy moved down its priority list,’ Mr Somasundaram added.

It is estimated that the total stock of gold held by Indians would be in the region of 20,000 tonne and, valued at current prices, it’ll be worth $1 trillion. However, the actual holdings, after taking into account unaccounted imports, ancestral holdings etc, would be in the region of 25,000-30,000 tonne.

The country imports over 900 tonne of precious metal each year, spending more than Rs 250,000 crore ($35 billion) annually. Most of this gold lies locked in safe deposit boxes, thus turning into unproductive asset and wasting India’s foreign earnings.

The government’s move comes at a time when many temples and trusts have reportedly been found to be holding tonnes of physical gold worth crores of rupees, which come as devotees’ offering to the deities. Besides, in the second week of October, customs officials in Kerala seized roughly 123 kg of smuggled gold valued at around Rs 50 crore during raids at 23 premises in Kerala’s Thrissur district.

Along with the gold amnesty scheme, the government is also planning to revamp the existing Sovereign Gold Bond Scheme to make it more attractive to buyers. “The decision to float the new gold plan had to be taken in the second week of October at a Cabinet meeting, but the proposal got deferred due to state elections in Maharashtra and Haryana,” the source said.