 "FAQs: How much gold you can buy without PAN, Aadhaar? How to check purity?")
Gold has a special significance during the festivals as it is considered a symbol of prosperity, wealth, and good fortune. During Diwali, buying and gifting gold is considered auspicious.
With the price of 24K gold hovering around Rs 61,900 per 10-gram, purchasing even a simple piece of jewellery can cost you a lot. However, are you familiar with the permissible limits for purchasing gold without the need to provide a PAN or Aadhaar Card?
In 2020, the government brought the gems and jewellery sector under the ambit of the Prevention of Money Laundering Act (PMLA), 2002, designating them as reporting entities.
These reporting entities under the Act are obligated to adhere to KYC norms, which involve requesting the purchaser's PAN or Aadhaar for cash transactions surpassing a specified threshold. Additionally, they are mandated to report substantial cash transactions amounting to Rs 10 lakh or higher to the government.
According to rule 114B of the Income Tax Rules 1962, furnishing PAN details for gold purchases is mandatory for transactions valued at Rs 2 lakh and above.
Daily cash transaction limit
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Section 269ST of the Income Tax Act, prohibits cash transactions exceeding Rs 2 lakh in a single day, in aggregate from one person in a day, or in relation to transactions associated with a single event or occasion from one person.
Consequently, gold purchases for an amount exceeding Rs 2 lakh in cash in a single day, would be in violation of income tax regulations. The recipient of the cash in such a transaction would be subject to a penalty equivalent to the cash transaction amount, as per Section 271D of the Income Tax Act.
As a result of these two provisions, for individuals purchasing gold jewellery valued at Rs 2 lakh or more, the provision demands either PAN or Aadhaar, even in the case of electronic payments. However, it is prohibited for any individual from engaging in cash transactions exceeding Rs 2 lakh.
Therefore, if the price of gold you are buying is less than Rs 2 lakh no KYC compliance is required for transactions, whether conducted in cash or electronically. Above Rs 2 lakh you will have to provide PAN or Aadhaar details.
Therefore, if the price of gold you are buying is less than Rs 2 lakh no KYC compliance is required for transactions, whether conducted in cash or electronically. Above Rs 2 lakh you will have to provide PAN or Aadhaar details.
What is the limit for holding gold jewellery and ornaments?
Possessing gold jewellery or ornaments obtained from legitimate sources of income is not restricted. Additionally, a 1994 circular from the Central Board of Direct Taxes (CBDT) specifies authorised limits within which no proof of investment is required for the gold possessed.
“In the case of a wealth-tax assessee, gold jewellery and ornaments found in excess of the gross weight declared in the wealth-tax return only need to be seized,” said the circular.
It further prescribed limits for the quantity of jewellery and ornaments that individuals can hold: married women are allowed up to 500 grams, unmarried women can possess up to 250 grams, and men are limited to 100 grams.
These restrictions pertain to family members of the person under scrutiny during search procedures, and tax officers may take jewellery belonging to individuals outside the family.
How to check the purity of gold?
When buying gold, it's crucial to consider purity, which can affect the price. Gold purity is measured in carats (K), with 24K being the purest form. Gold jewellery is typically 18-22K, with other metals mixed in for strength.
To ensure gold purity, Hallmarking is essential, and it became mandatory in June 2021 with a unique alphanumeric code (HUID) for quality assurance. The hallmarking charges are Rs 35 plus GST per piece, regardless of the jewellery's weight. The three signs of hallmarking include the BIS logo, purity/fineness grade, and the HUID. Gold purity is crucial when making an informed purchase.
Other methods of checking the purity of gold include fire assay, X-ray fluorescence, and inductively coupled plasma mass spectrometry (ICP-MS). Fire assay is traditional, and used for hallmarking and in mining. X-ray fluorescence is non-destructive, analysing X-ray emissions to determine gold content. ICP-MS is highly precise but expensive, mainly used by scientists and mining companies.
Another basic test involves marking the gold and applying nitric and hydrochloric acid to check if it dissolves, which indicates purity.
Gold's unique density can also help assess its purity. To determine gold purity, weigh the gold and measure its volume by immersing it in water. Calculate its density by dividing the weight by the volume and compare it to the density of pure gold.