Gold Amnesty Scheme-a proposal to exempt penalties on undeclared gold--had been proposed by Niti Aayog recently but was rejected by the Income Tax Department, an income tax official told Business Today. However, the proposal has been put forward yet again by Niti Aayog and Economic Affairs Ministry, sources say.
The tax department has argued that the scheme provides a very easy way to launder unaccounted money. "If you make it very open then it is very easy to convert (unaccounted) cash into gold," said an official from the income tax department.
The tax official said that probably the government is taking a fresh look at the scheme. He, however, said that he has no knowledge about revival of the plan.
A revenue department official, however, said that it's unlikely that the scheme would see the light of the day. Typically, ahead of budget-making process, these kinds of speculative reports appear, he said.
The finance ministry is apparently again pushing for the Gold Amnesty Scheme. The scheme plans to tax unaccounted gold holdings beyond a certain threshold. These amnesty schemes do attract interest as they exempt individuals from paying interest and penalty. They also provide immunity against any punishment.
It is estimated that around 23,000-24,000 tonne of gold lies unused in Indian households and religious institutions throughout the nation. In order to put this unutilised gold to use, the government had introduced the Gold Monetisation Scheme (GMS) in the Union Budget, 2015-16. However, the scheme was not a success as banks collected barely 11.1 tonne gold as of 31st August 2017--a meagre number as compared to the estimated holdings of 23,000-24000 tonne. Various studies suggest that around 11% of Indian households' savings are in gold.
However, experts believe it would be difficult to make people -- especially at the 'bottom of the pyramid' -- disclose their gold holdings. According to various reports, gold as an instrument of savings and investment holding is the highest amongst the 'bottom of the pyramid'. Maximum gold is held by the lowest wealth strata and as the wealth increases, there is a shift towards real estate.
Tax experts are also of the view that if at all the scheme is launched it would be used by many to convert their black money into white. "A lot of people who converted the cash into gold during demonetisation might use this scheme (if at all it is launched) to legitimise their unaccounted gold holdings," said a tax expert.
However, it is anybody's guess, how much gold can be disclosed through the scheme. According to tax experts, the government has no way of determining how much gold holding is with people over and above the threshold they may have for the Gold Amnesty Scheme.
At present those earning more than Rs 50 lakh annually have to disclose their assets in the income tax returns. These assets could also include gold holdings.