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How much gold in cash can you buy and do you need to submit ID proof for the same?

Buy Gold in cash: The withdrawal of Rs 2,000 notes from circulation by the Reserve Bank of India (RBI) has reportedly led to a large number of people rushing to buy gold with cash i.e. Rs 2000 notes. So, how much gold can a person legally buy without having to produce an ID proof / PAN card? Further, is there a limit on the amount of gold that can be bought with cash even after providing one’s 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.

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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.

There are no restrictions as to the amount to which you can pay to buy gold in cash under the income tax laws. However, the income tax laws have restrictions on the recipient for accepting any amount of two lakh rupees or more in cash in respect of a single transaction. So though you can pay any amount to buy gold the jewellery will not accept cash two lakh rupees and more in respect of every single transaction as the law prohibits him from accepting any amount of two lakh rupees or more for each transaction of the sale of jewellry. 

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In case the jewellry accepts cash beyond two lakh rupees, the income tax department can levy a penalty equal to the amount accepted in contravention of the legal provision.

Moreover, in case you are buying gold from a jeweller for a value over two lakh rupees whether through cash or otherwise, you have to provide the seller with your identity like a PAN card or Aadhaar Card. So you can buy gold upto Rs. 2 lakhs without having to furnish either PAN or Aadhaar number.

However, it should be noted that some organisations and jewellers have their own internal supplementary standards for proving customer identity.

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Investment in Sovereign Gold Bonds (SGB)

Investment in Sovereign Gold Bonds (SGB) helps you get better returns over the years. You get interest @ 2.50% every year on the issue price of the SGB. Moreover, as and when the SGB is redeemed, you do not have to pay any capital gains. Moreover, in addition to other benefits of electronic gold, you will not have to pay GST when you purchase SGB though you have to pay GST at the time of purchase of physical gold. Please note that though you may have to pay GST when you actually buy physical gold at the time of the wedding of your children but meanwhile the GST component saved will continue to earn interest and appreciation on your investment.

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