 "How much gold can you legally buy in cash without any ID proof in India?")
The withdrawal of Rs 2,000 notes from circulation by the Reserve Bank of India (RBI) is believed to have triggered a rush of people to buy gold with cash, i.e. Rs 2,000 notes.
So, how much gold can a person legally buy without providing ID or a PAN card? Is there a limit to how much gold may be bought with cash after producing a PAN card?
The government has tightened the restrictions governing the purchase of gold with cash by placing the gems and jewellery sector within the Prevention of Money Laundering Act (PMLA), 2002. The government issued the notification on December 28, 2020 in this regard.
Jewellers have been designated as reporting entities under the Act, which requires them to comply with KYC norms (i.e., asking for the purchaser's PAN or Aadhaar for cash transactions exceeding a specified limit) as well as report large value cash transactions of Rs 10 lakh or more to the government.
Therefore, how much gold can one buy in cash without having to mandatorily produce PAN or Aadhaar at the time of the transaction? Let's find out.
Cash transaction limits
Also Read
Income tax laws prohibit cash transactions above a certain amount. Section 269ST of the Income Tax Act of 1961 prohibits cash transactions exceeding Rs 2 lakh in a single day, in aggregate from a person in a day, or in respect of transactions connected to a single event or occasion from a person. Thus, if you purchase gold jewellery in cash for more than Rs 2 lakh in a single day, you will be in violation of income tax legislation.
The receiver of the cash in such a transaction would be entitled to pay a penalty equal to the amount transacted in cash, according to Section 271D of the Income Tax Act.
PAN/Aadhaar must
"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," said Stuti Galiya, Partner of law firm Khaitan & Co told Economic Times (ET).
Thus, if you buy gold for more than Rs 2 lakh per transaction, regardless of the mode of payment (cash or electronic), you must disclose PAN details to the jewellers, she added.
The PMLA guidelines also require the PAN or Aadhaar number for transactions that surpass a specific threshold.
"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.
However, it should be noted that some organisations and jewellers have their own internal supplementary standards for proving customer identity.