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Gold Imports in November Highest in 2016, Suggests Black Money was Converted

Tushar Dhara | News18.com

First published: December 1, 2016, 9:11 PM IST | Updated: Yesterday
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Gold Imports in November Highest in 2016, Suggests Black Money was Converted
Representative photo (GETTY IMAGES)

New Delhi: Indians are known for their love for gold, but this surge in imports of the yellow metal in November cannot be explained by just that... A staggering 100 tons of gold were imported during the month that demonetisation was announced, lending credence to the theory that there was a rush for converting black money to gold in the days post the note ban.

Bachhraj Bamalwa, director of the All India Gems and Jewellery Trade Federation, told News18 that gold imports in November are estimated to be around 100 tons – the most this year, and about a fifth of the 500 tons of the precious metal imported in 2016.

Prime Minister Narendra Modi announced the withdrawal of high denomination bank notes of 500 and 1,000 rupee denomination on November 8, a step that he said will rein in black money. An analyst News18 spoke to said some of it may have already been converted to gold.

Also Read: No, The Gold You Inherited or Bought With Disclosed Income Won't be Taxed

“In the four hours between the Prime Minister’s announcement and midnight on November 8, gold was selling in the informal markets at Rs 50,000 to 55,000 per 10 grams when the normal price is around Rs 30,000,” Dr Ravi Singh, Research Head at SMC Commodities Trade, said. “This price, along with the level of imports is an indication that black money was being converted,” he added.

Singh said that this was possibly the reason why the government has come out with a clarification on gold. A press release issued by the Finance Ministry today stated: "The jewellery/gold purchased out of disclosed income or out of exempted income like agricultural income 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."

What this means is that people who cannot explain how they financed the gold purchases will have to pay taxes as specified in the Income Tax Act of 1961.

The Ministry further clarified that the Taxation Laws (Second Amendment) Bill, 2016 which has been passed by the Lok Sabha and is under consideration with Rajya Sabha has not introduced any new provisions. Thus, legitimate holding of jewellery up to any extent is fully protected.

Also Read: Gold Imports in December to Halve as Cash Crunch Squeezes Demand

There were apprehensions in certain quarters about a new crackdown on gold as part of the “war on blackmoney” promised by Prime Minister Modi. This was fuelled by the lines in the release which state that “During the search operations, 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 the family shall be made.”

This has sparked fears of a government witch hunt. However, Dr. Ravi Singh said that these provisions were there in the old act and that the government probably wants to check gold purchases against the money that was used to finance them to rule out black money, keeping in mind the volume of gold imports.

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