Cash Limits on Gold and Jewellery Buying: ₹2 Lakh, PAN, and Who Gets Penalised
- No one may accept ₹2 lakh or more in cash from a single person in a day, for one transaction, or for one event — and the penalty equals the entire amount received.
- The penalty falls on the jeweller who accepts the cash, not on the customer who pays it, which is why a shop will refuse to split a bill for you.
- PAN is compulsory for a sale or purchase of goods or services above ₹2 lakh per transaction, whatever the mode of payment — cash, card or bank transfer alike.
Gold buying peaks during the festive season, and so does the conversation at the counter about how much can be paid in cash. There is a lot of folklore about this — that the limit is ₹50,000, that it resets if you come back tomorrow, that splitting the bill solves it. The actual rule is narrow, strict, and aimed squarely at the person receiving the money.
The ₹2 lakh rule, precisely
No person may receive ₹2,00,000 or more in cash:
- in aggregate from one person in a single day; or
- in respect of a single transaction; or
- in respect of transactions relating to one event or occasion from one person.
Those three limbs exist precisely to defeat the obvious workarounds, and it is worth seeing how each one lands.
| What the customer tries | Does it work? | Why |
|---|---|---|
| ₹2.5 lakh cash in one bill | No | Single transaction |
| Two bills of ₹1.5 lakh on the same day | No | Aggregate from one person in a day |
| ₹1.5 lakh today, ₹1.5 lakh tomorrow, for one wedding set | No | Transactions relating to one occasion |
| ₹1.5 lakh cash and ₹1.5 lakh by card | Yes | Only the cash leg counts, and it is under ₹2 lakh |
| Genuinely separate purchases months apart, each under ₹2 lakh | Yes | Different transactions, different occasions |
The penalty lands on the seller
This is the part customers find surprising. The penalty for breaching the receipt limit is an amount equal to the sum received, and it is levied on the receiver. A jeweller who accepts ₹3 lakh in cash faces a ₹3 lakh penalty. The buyer is not penalised under this provision at all.
That asymmetry explains the behaviour you see in shops: a jeweller who refuses to split your bill across two days is not being difficult, they are protecting themselves from a penalty equal to the whole sale. The relief available is narrow — it turns on showing good and sufficient reason for the breach, which is not a defence anyone wants to rely on.
Separately, a business paying more than ₹10,000 in cash to one person in a day loses the deduction for that expense, which is a different rule pointing in the same direction.
When PAN becomes compulsory
PAN is required to be quoted for a sale or purchase of goods or services where the value exceeds ₹2 lakh per transaction — and this applies regardless of how you pay. Paying by card or bank transfer does not remove the PAN requirement; it only removes the cash problem.
So a ₹4 lakh necklace paid for entirely by bank transfer is perfectly legal and still needs PAN. A ₹1.9 lakh purchase in cash needs neither. The two thresholds happen to sit at the same number, which is why they get conflated, but they are separate requirements doing separate jobs.
The other cash rules people confuse with this one
Three separate limits get mixed together in conversation, and they do different jobs.
| Rule | Limit | Who it hits |
|---|---|---|
| Cash receipt limit | ₹2,00,000 | The receiver — penalty equal to the amount received |
| Cash business expense | ₹10,000 per person per day | The payer — the expense is disallowed |
| Bank reporting of cash deposits | ₹10,00,000 a year in savings accounts | Nobody directly — the bank reports it, and it appears in your AIS |
The third is the origin of most of the folklore. A large festive cash deposit is not illegal and carries no penalty of its own, but it is reported and it will show up in your Annual Information Statement. If the source is a genuine business receipt that your books already record, there is nothing to worry about. If it is not reconciled to anything, that is what generates a query months later.
Practical guidance for both sides of the counter
If you are buying: plan to pay the larger part digitally. Keep the invoice — for gold it is also your evidence of cost when you eventually sell and have to compute capital gains, and a missing purchase invoice is a genuine problem years later. Never ask a jeweller to split a bill; you are asking them to take a penalty equal to the whole amount.
If you are selling: set a hard counter rule below the limit rather than at it, because aggregation across the day is easy to lose track of during a festival rush. Record PAN wherever the transaction crosses ₹2 lakh. Train counter staff that the three limbs are alternatives — satisfying one of them is enough to attract the penalty.
Common mistakes
- Believing the limit is ₹50,000. That figure comes from unrelated reporting rules and is not the cash receipt limit.
- Splitting a bill across days for the same occasion. The occasion limb catches precisely this.
- Thinking the buyer is the one penalised. The penalty is on the receiver, and it equals the whole sum received.
- Assuming a bank transfer removes the PAN requirement. PAN depends on the value, not the payment mode.
- Treating ₹2 lakh as a per-bill limit. Aggregation from one person in one day is an independent test.
- Throwing away the purchase invoice. Without it, proving cost when you sell the gold later becomes very difficult.
If you want to work out what a later sale of that gold would cost you in tax, the capital-gains and other calculators on the Free Tools page are free and need no sign-up.
Do it yourself in minutes — free to try, no login needed.
Open Free Tools →Frequently asked questions
What is the cash limit for buying gold in India?
No person may accept ₹2,00,000 or more in cash from one person in a single day, for a single transaction, or for transactions relating to one event or occasion. Below that, cash is permitted. The limit bites on the amount received in cash, so a part-cash part-digital payment is tested only on the cash portion.
Who is penalised if cash above ₹2 lakh is accepted?
The person receiving the money — in practice the jeweller — faces a penalty equal to the entire sum received. The buyer is not penalised under this provision. That is why shops refuse to split large cash bills across days or invoices.
Is PAN compulsory for buying jewellery?
PAN must be quoted where the value of a sale or purchase of goods or services exceeds ₹2 lakh per transaction, and this applies whatever the payment mode. A purchase above that figure paid entirely by bank transfer still requires PAN; a purchase below it does not.
Can I pay ₹1.5 lakh cash today and ₹1.5 lakh tomorrow?
Not if both payments relate to the same purchase or the same occasion, such as one wedding set. The rule has three alternative limbs — aggregate in a day, a single transaction, and transactions relating to one occasion — and splitting across days defeats only the first of them.
General information for FY 2026-27, not professional advice for your specific case. Rules change — verify against the latest notification or ask a KyaTax expert.
Related: All free tools · More guides · Virtual CFO