In case of inherited gold, you can disclose the price paid by the original buyer. However, if you do not have the details of the original price paid, you may disclose the fair market value as on 1st April, 2001. As far as gold holdings are concerned, there are no limitations on the quantum of gold one can hold. The tax department has clarified this through a circular in 2016. There is also no limit on the gold jewellery one can inherit. The circular also provides for the limit of gold jewellery or ornaments which will not be seized in case of a tax raid even if it is not matching the income of the person.
Jewellery and ornaments to the extent of 500 grams for married lady, 250 grams for unmarried lady, and 100 grams for male members will not be seized, even if prima facie, it does not seem to be matching with the income record of the assessee. Tax officials may not also seize higher quantity of gold jewellery based on factors including family customs and traditions.
In case of a tax scrutiny, however, one has to explain the source of gold. Therefore, in case of purchased gold it is always better to keep the receipts safe. If you have inherited gold, you can show a copy of the original invoices or a copy of the gift deed, settlement deed or will. If there is no documentary evidence, tax authorities can consider the family customs, social status and so on for determining the source of gold.