How much gold can you legally buy in cash without any ID proof?
By including the gems and jewellery industry in the scope of the 2002 Prevention of Money Laundering Act (PMLA), the government has strengthened the regulations controlling the purchase of gold using cash. On December 28, 2020, the government issued a notification in this regard.
The Act has designated jewelers as reporting entities, which means they must abide by the KYC requirements (asking the buyer for their PAN or Aadhaar for cash transactions exceeding a specified limit) and report large value cash transactions of Rs 10 lakh or more to the government.
Limits on cash transactions
Laws governing income taxes forbid cash transactions over a specific threshold. Cash transactions exceeding Rs 2 lakh from a single person in a single day, in total from that person in a single day, or in relation to transactions connected to a single event or occasion from that person are prohibited under Section 269ST of the Income Tax Act of 1961. Therefore, you will be in violation of income tax law if you spend more than Rs 2 lakh on gold jewellery in a single day.
According to Section 271D of the Income Tax Act, the recipient of the cash in such a transaction would be required to pay a penalty equivalent to the amount exchanged in cash.
Also Read: How to buy newly launched Rs. 75 coin? Is it for circulation?
Aadhaar/PAN must
According to Rule 114B of the Income Tax Rules of 1962, “”Furnishing PAN details for gold purchase is mandatory for transactions valued at Rs 2 lakh and above under Rule 114B of the Income Tax Rules of 1962,” Stuti Galiya, Partner of the legal firm Khaitan & Co, told Economic Times (ET).
Accordingly, regardless of the method of payment (cash or electronic), if you purchase gold for more than Rs 2 lakh in a single transaction, you must provide the jewellers with your PAN information.
The PAN or Aadhaar number is also required by the PMLA guidelines for transactions that exceed a certain level.
“PAN/Aadhaar is mandatory for any transactions exceeding Rs 2 lakh. In practice, jewellers who do not receive more than Rs 2 lakh in cash from a single person when selling gold jewellery are in compliance with existing Income Tax Act provisions and will not be covered by the December 2020 PMLA notification (unless the jeweller believes the transaction is suspicious),” Galiya said.
It should be noted, nonetheless, that certain businesses and jewellers have their own internal supplemental requirements for demonstrating client identity.
