Social media has been abuzz with rumours about gold being the next target of the government after 500 and 1,000 rupee notes. The Central Board of Direct Taxes (CBDT) has fuelled the fears by condescending to brook 100 gram of gold per male, 250 gram per unmarried female and 500 gram per married female as meeting the litmus test of honest earning and investment.
Anything in excess would presumably come under the taxman’s lens, except for inherited gold and gilded jewellery - an escape route that would be exploited gleefully by everyone in a country where gold forms a substantial part of stri dhan as well as investment for the rainy day.
The norms smack of socialistic relic - need-based approach to income and wealth. Income tax must be on actual income even though capacity can be the guiding factor. In Columbia, for example, presumptive taxation ruled the roost for long.
Visible signs of wealth triggered the presumption. A bungalow in a posh locality gave rise to certain amount of income just as a swanky car or yacht did. Presumptive taxation subject to the right to rebuttal is an excellent device to prise open resistance and hard-to-tax categories. Israel fixes profit norms industry-by-industry.
India too has embraced presumptive taxation in a limited way. A classic example is 8 per cent profits on turnover of those who do not breach the Rs 1 crore mark. But it is one thing to presume one’s income but quite another to spare one of tax liability on woolly notions of need. A woman to be sure needs more gold to bedeck herself but men folk too invest in gold not to flaunt but to hedge against inflation.
Come to think of it, a family of ten with eight females passes the taxman’s litmus test whereas a family of ten with eight males would be grilled assuming both have the same income and gold. Who knows the same benighted officials may next come up with norms for immovable property.
|The bulk of black money finds shelter in gold.|
It may be 100 square feet per adult member and 75 per adolescent and 50 per toddler. Anything in excess would have to be explained to the tax sleuths. Nothing can be more far-fetched than need-based exemptions.
Malaysia and a few other countries give family allowance per person in the family. It is based on the woolly and socialist notion that one’s tax liability should have an inverse relationship with the number of mouths he has to feed.
It is guesstimated that India has a stock of 20,000 metric tonne of gold translating into humongous wealth of Rs 60 lakh crore. It is widely known that gold is a great leveller in the sense that it is to be found both in rural India as well as urban, both among affluent sections and the indigent.
While it is true that the bulk of black money finds shelter in gold, it is equally true that honest people too have set store by it and who may feel harassed if they are called upon to explain their gold beyond these limits.
The demonetisation brahmastra has admittedly been used with telling effect to call the bluff of those holding black money in high denomination currency notes. Gold however is a different kettle of fish. It defies provenance, the litmus test applied for art. Inheritance from generation to generation then should be the easiest explanation for one to get away.
The government has been at its wits’ end tackling the massive treasure trove of gold. Its gold monetisation schemes have been miserable flops. Search on bank lockers might result in huge stocks of gold tumbling out but what about dingy lofts especially in villages, the bulk of which could well be the result of hard and honest toil.
Tightening the screws on jewellers may discipline this sector as trends show, but past pile-up of gold would continue to defy the taxman.