Buying gold this festive season? Check tax rules on cash purchases, PAN requirement and limit on holding gold at home

Festive gold buying is common in India, but cash purchases and tax compliance rules apply. Here's all you need to know before purchasing ornaments and jewellery this Dhanteras. 

Gold purchases typically pick up during the festive season in India, with many households buying jewellery, coins and bars for investment or as part of tradition. This uptick demand is often witnessed during Akshaya Tritiya and Dhanteras, as buying gold is considered auspicious on these occasions.

While there is no blanket limit on how much gold a person can legally own, tax authorities may scrutinise holdings if the source cannot be explained. Here's what you need to know about tax rules on cash purchases, PAN requirement and the limits on holding gold at home without having to produce proof.

Is there a cap on gold purchases made in cash?

India does not ban buying gold using cash, but it does restrict the amount that can be accepted in cash in certain circumstances. However, the burden of this compliance requirement lies on the seller and not the buyer.

Under Section 269ST of the Income-tax Act, an individual cannot receive ₹2 lakh or more in cash in a single transaction, in a single day from one person, or in respect of transactions relating to one event or occasion. The same set of restrictions apply to gold purchases as well.

The rule is designed to prevent people from bypassing the cash limit by splitting payments across multiple invoices or days for the same purchase. Under Section 271DA, the penalty for violating this provision can be equal to the amount received in breach of the rule, and it is levied on the recipient.

For gold purchases made in cash, the recipient is the jeweller, giving them a strong incentive to refuse cash payments for high-value items.

When is a PAN required for jewelry purchases?