The Rs 2 Lakh Cash Transaction Limit
Under Section 269ST of the Income Tax Act, no person can receive more than ₹2 lakh in cash from a single person for a single transaction or for transactions relating to one event. Gold sales are explicitly covered. A buyer who pays you more than ₹2 lakh in cash for a gold transaction is in violation of this law — and so are you if you accept it.
For gold sales in Madurai, this means any transaction valued above ₹2 lakh must be settled by bank transfer (NEFT, IMPS, RTGS, cheque, or demand draft). Violations attract a penalty equal to the amount received in cash. Legitimate gold buyers in Madurai are fully aware of this rule and will not offer cash for large transactions.
TDS on High-Value Gold Transactions
Section 194Q of the Income Tax Act requires a buyer to deduct TDS (Tax Deducted at Source) at 0.1% if the annual aggregate purchase from a single seller exceeds ₹50 lakh. This is primarily relevant to large business buyers, not retail sellers, but it is worth being aware of. If your buyer mentions TDS deduction for a very large transaction, this is a legitimate legal requirement, not an excuse to reduce your payout.
For retail sellers in Madurai selling occasional lots of family gold, TDS is unlikely to apply unless the total transaction value is very high. However, ensuring payment is by bank transfer creates a clean audit trail should income tax authorities ever enquire about the receipt.
Safety recommendation: For transactions above ₹50,000, always opt for bank transfer rather than cash — regardless of whether the amount is below the ₹2 lakh cash limit. Cash can be lost, stolen, or miscounted. A bank transfer creates an instant, verifiable record of the full amount received.
Capital Gains and the Importance of a Payment Record
When you eventually file your income tax return, capital gains from gold sales are reportable income. The sale proceeds and the date of the transaction are needed to calculate your gain (sale price minus indexed cost of purchase). A bank transfer receipt from the buyer, plus your original purchase invoice, gives you everything needed to complete this calculation accurately.
Cash transactions leave no automatic paper trail. If you sell gold for cash and report the income correctly, you will need to reconstruct the transaction details from memory or from the buyer's receipt alone. A bank record is a far more reliable document for tax purposes and protects you from any future dispute about the transaction amount or date.
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