Inherited family gold? How to prove ownership and source of jewellery to Income Tax Department

A recent case involving inherited jewellery valued at ₹1.56 crore highlights the importance of maintaining records that establish the ownership and source of family jewellery, even when the original purchase invoices are no longer available.

The Kolkata Income Tax Appellate Tribunal (ITAT) ruled in favour of the assessee in the case, underscoring the importance of supporting claims about inherited jewellery with credible and consistent evidence.

The mere presence of jewellery at a person's home or in a locker does not, by itself, establish how it was acquired or who originally owned it.

Where jewellery has been passed down through generations, taxpayers should be able to demonstrate a credible chain of ownership showing how it came into the family.

Documents such as old valuation reports, wealth-tax records, insurance documents, wills, succession papers and family settlement agreements can help establish the history of jewellery.

Photographs showing family members wearing the jewellery, along with locker records and other ownership-related documents, may also provide supporting evidence, particularly when the original purchase bills are unavailable.

However, taxpayers still need to provide a credible explanation of the source. The tax authorities may consider the evidence as a whole rather than relying on a single document.

An inventory containing photographs, descriptions and details of the jewellery, along with a report from a registered or qualified valuer, can document its identity, weight and prevailing value.

A current valuation report, however, cannot by itself establish when the jewellery was acquired or who originally purchased or owned it. It should therefore be maintained alongside historical records establishing the jewellery's ownership and source.

Jewellery acquired from disclosed or exempt income, accumulated household savings or inherited wealth can also be explained through supporting documentation.

Purchase invoices, inheritance records, wills, succession documents and other ownership records can help establish the source and history of such jewellery.

These thresholds, however, should not be interpreted as limits on the amount of jewellery that a person is legally permitted to own.

Rather, the quantities are relevant to the treatment of jewellery found during a search and the circumstances in which its possession may be considered reasonable.

Consequently, the person in whose name a locker is held could face a presumption of ownership over jewellery found inside it. The individual may then need to explain both who owns the jewellery and how it was acquired.

Maintaining an organised record of inherited and purchased jewellery, including old valuation reports, photographs, wills, insurance records, purchase bills and other ownership documents, can therefore help families explain the jewellery's source if questions arise during tax proceedings.