Buying Gold in Cash: Rules on PAN and Aadhaar Requirements
As the festive season approaches, many turn their attention to purchasing precious metals such as gold and silver, considered auspicious during occasions like Dhanteras, Diwali, and Akshaya Tritiya. With the price of 24K gold hovering around ₹60,000 per gram, it’s essential to understand the regulations surrounding gold purchases.
In an effort to combat money laundering, the government has tightened the rules governing cash transactions in the gems and jewellery sector by bringing it under the Prevention of Money Laundering Act (PMLA) of 2002. This notification, issued on December 28, 2020, mandates that jewellers comply with Know Your Customer (KYC) norms, requiring the collection of PAN or Aadhaar details for cash transactions exceeding a specified limit. Additionally, any large cash transaction of ₹10 lakh or more must be reported to the government.
Cash Transaction Limits Under Income Tax Laws
Under income tax laws, cash transactions are capped at a specific limit. According to Section 269ST of the Income Tax Act, cash transactions exceeding ₹2 lakh in a single day, whether in total from one person or for transactions related to one event, are prohibited. If you attempt to buy gold jewellery exceeding ₹2 lakh in cash, you would be violating this law. The recipient of such cash will be liable to pay a penalty equivalent to the transaction amount under Section 271D of the Income Tax Act.
Example:
If an individual purchases ₹4 lakh worth of gold jewellery in cash, this amount exceeds the ₹2 lakh limit defined in Section 269ST, making a penalty applicable under Section 271D. In this case, the jeweller, as the cash recipient, would incur a penalty of ₹4 lakh, thereby dissuading them from accepting cash transactions above this amount.
PAN/Aadhaar Requirements for Transactions Over ₹2 Lakh
As stipulated in Rule 114B of the Income Tax Rules of 1962, providing PAN details for gold purchases becomes mandatory for transactions valued at ₹2 lakh or more. This requirement holds true regardless of whether the purchase is made in cash or electronically. The PMLA directly specifies that PAN or Aadhaar is necessary for transactions above a certain threshold.
Thus, for transactions involving cash exceeding ₹2 lakh, PAN or Aadhaar is required. Practically speaking, jewellers who refrain from accepting cash over this limit can comply with both the Income Tax Act and the PMLA regulations, unless they suspect the transaction to be unusual. It’s worth noting that individual jewellers may also implement their own additional protocols to verify the identity of customers.
While the PMLA does allow for high-value cash transactions under KYC compliance, anyone making a gold jewellery purchase of ₹2 lakh or more must present either PAN or Aadhaar, regardless of payment method. However, Section 269ST of the Income Tax Act prohibits cash transactions beyond ₹2 lakh, meaning KYC compliance is unnecessary for transactions below this threshold, whether they are cash or electronic.