The proposed amendments also do not seek to tax inherited gold and jewellery as also those items that are purchased through disclosed or agriculture income, Central Board of Direct Taxes (CBDT), the apex direct taxes body, said in a statement on Thursday.
There will be no seizure of gold jewellery and ornaments to the extent of 500 grams per married lady, 250 grams per unmarried lady and 100 grams per male member of a family during search operations, it said, reiterating existing guidelines.
The government has proposed amendments to the I-T Act through Taxation Laws (Second Amendment) Bill, which received Lok Sabha approval on Tuesday, seeking to impose up to 85 per cent tax and penalty on undisclosed wealth that is discovered by tax authorities during search and seizure.
This had triggered rumours that gold jewellery could be covered under the amended law. Dispelling such apprehensions, CBDT has clarified that no new provision had been introduced regarding chargeability of tax on jewellery.
"The jewellery/gold purchased out of disclosed income or out of exempted income like agricultural in-come or out of reasonable household savings or legally inherited, which has been acquired out of explained sources, is neither chargeable to tax under the existing provisions nor under the proposed amended provisions,"it said.
"Further, legitimate holding of jewellery up to any extent is fully protected,"it said.
The bill, which is currently under consideration of the Rajya Sabha, proposes to amend Section 115BBE of the Income-Tax Act to provide for 60 per cent tax and a 25 per cent surcharge on it — totalling 75 per cent — on black money holders.
Another section inserted provides for an additional 10 per cent penalty on being established that the undeclared wealth is unaccounted or black money, taking the total incidence of levies to 85 per cent.
CBDT said tax rate under section 115BBE is proposed to be increased only for unexplained income as there were reports that the tax evaders are trying to include their undisclosed income in the return of income as business income or income from other sources.
"The provisions of section 115BBE apply mainly in those cases where assets or cash etc. are sought to be declared as 'unexplained cash or asset' or where it is hidden as unsubstantiated business income, and the assessing officer detects it as such,"the CBDT statement said.
The bill also proposes to raise penalty under I-T Act for search and seizure cases to 30 per cent, from 10 per cent or 20 per cent currently, in a move aimed at deterring black money holders.
Once the amendments are approved by Parliament, there would be a penalty of 30 per cent of unaccounted income, if admitted and taxes are paid. This would take the total incidence of tax and penalty to 60 per cent.
The government has decided to retain the provision of levying penalty of 60 per cent of income in "any other cases" while proposing to amend Section 271AAB. This would raise the incidence of tax and penalty to 90 per cent.
In a separate decision, the government has done away with exemptions from countervailing duty of 12.5 per cent on imports of gold coins.
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