The jeweller's real cash rulebook: ₹2L (269ST), ₹10L (PMLA CTR), ₹10K (40A(3)), and 1% (TCS)

A Sunday in Punjagutta

A retired banker walks into a Punjagutta showroom on a Sunday to buy jewellery for his daughter’s wedding. He proposes to pay ₹8.4 lakh in cash over four days, with each handover kept below ₹2 lakh and allocated across three invoices.

The showroom feels safe because nobody has accepted ₹2 lakh in one bundle. That instinct is wrong.

The shop is already exposed to the single-day aggregation limb, the single-transaction limb, the wedding-event limb and the PMLA obligation to recognise linked cash operations. Section 269ST tests more than the size of each cash instalment; it tests the person, the day, the underlying transaction and the event or occasion. Its penalty provision can equal the cash received in contravention. Separately, the PMLA framework looks for a single or linked cash operation at the ₹10 lakh level. These are parallel controls, not alternative interpretations of “the cash rule.” (Income-tax Act, section 269ST; PMLA dealer guidance)

There is also an arithmetic warning. Three invoices, each genuinely representing a separate transaction below ₹2 lakh, cannot produce ₹8.4 lakh of cash. If ₹8.4 lakh is allocated across only three invoices, at least one invoice necessarily carries ₹2 lakh or more. Calling later receipts “instalments” does not change the value received in respect of that transaction.

Four thresholds operating at once

₹2 lakh: section 269ST

Section 269ST says that no person may receive ₹2 lakh or more otherwise than through an account-payee cheque, account-payee bank draft, electronic clearing system through a bank account or another prescribed electronic mode: first, in aggregate from one person in one day; second, in respect of a single transaction; or third, in respect of transactions relating to one event or occasion from one person. Passing any one limb is insufficient; all three must be satisfied independently. (Income-tax Act, section 269ST)

₹10 lakh: PMLA reporting perimeter

S.O. 4713(E) dated 28 December 2020 brings dealers in precious metals and precious stones into the designated-business framework when they engage in a cash transaction with a customer equal to or above ₹10 lakh, whether in one operation or several operations that appear linked. Rule 3(1)(A) of the Prevention of Money-laundering (Maintenance of Records) Rules requires records of cash transactions above ₹10 lakh and of individually smaller, integrally connected cash transactions occurring within a month whose monthly aggregate exceeds ₹10 lakh. Operationally, a jeweller should flag the account at ₹10 lakh rather than debate the distinction between “equal to” in the notification and “more than” in Rule 3. (S.O. 4713(E) and dealer guidance; PML Rules 3 and 8)

The Principal Officer furnishes the prescribed monthly information by the fifteenth day of the succeeding month through the FIU-IND reporting system. This is commonly described as filing within 15 days after month-end. (PML Rules 7 and 8)

₹10,000: section 40A(3)

Section 40A(3) concerns money going out, not customer receipts. If deductible business expenditure is paid otherwise than through the permitted banking or electronic modes and the payment or aggregate paid to one person in one day exceeds ₹10,000, the expenditure is ordinarily disallowed, subject to the prescribed Rule 6DD exceptions. Supplier urgency does not itself rewrite the limit. (Income-tax Act, section 40A(3))

1% TCS and 0.1% buyer TDS: a necessary correction

The proposition that section 206C(1F) currently imposes 1% TCS on the cash portion of jewellery consideration exceeding ₹2 lakh is not correct. Jewellery cash-sale TCS historically appeared in section 206C(1D), which was omitted from 1 April 2017. Section 206C(1F) originally covered motor vehicles exceeding ₹10 lakh and now also covers specified luxury goods exceeding ₹10 lakh; the notified list does not include jewellery. A jewellery retailer should therefore not collect 1% under section 206C(1F) merely because a jewellery sale has a cash component. (Finance Act 2017, section 72; CBDT FAQ on section 206C(1F))

Section 194Q remains a separate buyer-side obligation. From 1 July 2021, a buyer whose immediately preceding financial-year business turnover exceeded ₹10 crore must deduct TDS at 0.1% on the amount by which purchases of goods from a resident seller exceed ₹50 lakh in the current financial year. For a jeweller, this commonly applies to bullion or jewellery purchases from a regular supplier. (Income-tax Act, section 194Q)

The old statement that section 194Q “overrides section 206C(1H)” is now largely historical: section 206C(1H) was removed from the overlap rule with effect from 1 April 2025 as part of its omission. The current section must be checked for the relevant transaction year rather than copied from an old TDS chart. (Income-tax Act, section 194Q, amendment note)

The three limbs of section 269ST

Limb (a): one person, one day

Suppose the wedding buyer pays ₹1.9 lakh against one invoice in the morning and ₹1.9 lakh against another invoice that evening. The showroom has received ₹3.8 lakh from one person in one day. Limb (a) is breached even though each receipt is below ₹2 lakh. The section 271DA exposure can equal ₹3.8 lakh, subject to the statutory defence. (Sections 269ST and 271DA)

Limb (b): one transaction

If each invoice represents a genuinely separate transaction below ₹2 lakh, limb (b) may not be breached by that invoice alone—although limb (a) can still catch multiple invoices received on the same day.

The proposed ₹8.4 lakh example cannot, however, fit into only three invoices while keeping every invoice below ₹2 lakh. If the third invoice carries ₹4.6 lakh paid through several sub-₹2 lakh instalments, limb (b) applies because the aggregate received in respect of that single transaction is ₹2 lakh or more. Instalment size is not the statutory test. (Income-tax Act, section 269ST(b))

Limb (c): one event or occasion

Even if the jeweller used five invoices and kept both every invoice and every day below ₹2 lakh, the wedding remains one event or occasion. If all five purchases are for the same daughter’s wedding and the same person pays ₹8.4 lakh in cash over four days, limb (c) applies to the event-level aggregate. Changing dates, counters, invoice numbers or sales employees does not divide the wedding into unrelated occasions. (Income-tax Act, section 269ST(c))

The PMLA trap is linkage, not total showroom cash

The ₹8.4 lakh wedding series does not by itself reach the ₹10 lakh PMLA threshold. It should nevertheless remain visible as a connected customer series, because another linked payment during the same month could carry the aggregate across the reporting line. (PML Rule 3(1)(A))

Two unrelated wedding customers paying ₹8.4 lakh each do not automatically form one ₹16.8 lakh connected series merely because they visited the same showroom in the same month. The rule requires transactions to be integrally connected, and the dealer notification speaks of several operations with a customer that appear linked. Common payer, mobile number, PAN, family, beneficial owner, invoice chain or occasion may establish linkage; two independent customers ordinarily do not. (S.O. 4713(E) and dealer guidance)

The section 271DA penalty math

Section 271DA provides for a penalty equal to the amount received in contravention of section 269ST: effectively 100%. If ₹8.4 lakh is treated as the offending event-linked cash receipt, the potential penalty is ₹8.4 lakh. On a business earning a 12% net margin, ₹8.4 lakh is the entire margin on ₹70 lakh of sales. (Income-tax Act, section 271DA)

The defence is not a general discretion to reduce the penalty. No penalty is imposable if the recipient proves “good and sufficient reasons” for the contravention. Further, although older versions assigned the penalty to the Joint Commissioner, penalties imposed on or after 1 April 2025 are assigned to the Assessing Officer. The defence is fact-specific and should be supported by contemporaneous evidence, not reconstructed after notice. (Finance Act 2025, section 85)

The seller-side and buyer-side tangle

For a wedding-jewellery sale to a consumer, section 269ST and the applicable PMLA controls must be tested. There is no current jewellery-specific 1% TCS under section 206C(1F); treating it as a conservative collection position would itself rest on an obsolete section history. (Finance Act 2017, section 72; CBDT section 206C(1F) FAQ)

When the showroom buys bullion, section 194Q shifts the focus to the jeweller as buyer. If its preceding-year turnover exceeded ₹10 crore and purchases from that resident supplier cross ₹50 lakh during the year, it deducts 0.1% on the amount exceeding ₹50 lakh, unless the transaction falls within section 194Q(5). (Income-tax Act, section 194Q)

The daily discipline rhythm

• No cash allocation to a single customer transaction may reach ₹2 lakh; a ₹1.99 lakh invoice is not automatically safe if the day or event limits have already been consumed. (Section 269ST)
• Track receipts by PAN, mobile number, payer and customer family in a day-wise ledger; stop further cash once the customer’s daily aggregate approaches ₹2 lakh. (Section 269ST(a))
• Flag every disclosed wedding, festival purchase, anniversary or jubilee as an event basket and aggregate all related invoices and payers appropriately. (Section 269ST(c))
• Maintain a month-to-date connected-cash field for each customer and related party; reaching ₹10 lakh must create a PMLA review and reporting flag. (PML Rule 3)
• Have the nominated management-level Principal Officer review the cash-receipt and linkage logs every week and complete the prescribed monthly reporting by the fifteenth day of the succeeding month. (PML Rules 7 and 8)

What the recurring engagement looks like

The control environment should combine a cash-discipline dashboard, monthly PMLA threshold review, section 269ST exception log, section 194Q supplier tracker, Principal Officer nomination, documented AML and customer-due-diligence policy, and quarterly BIS-hallmarking and GST reconciliation.

This is not four compliance tracks maintained in four files. It is one operating rhythm in which the invoice, payer identity, payment mode, customer relationship, event tag, month-to-date cash and supplier-year aggregate reconcile to the books every week.

Frequently asked questions

Can I split a wedding sale across five days?

No. Section 269ST(c) aggregates transactions relating to one event or occasion from one person. Splitting dates or invoices does not neutralise the wedding-event limb. (Section 269ST(c))

My customer refuses to share PAN. What is my way out?

For an occasional transaction of ₹50,000 or more, Rule 9 requires customer identification and verification. Depending on the applicable KYC and income-tax rules, Form 60 and an officially valid identity document may be available where the customer does not have PAN; refusal to provide any acceptable KYC means the transaction should not proceed. (PML Rule 9)

Do PMLA, section 269ST and section 206C(1F) apply to the same jewellery sale?

Section 269ST and PMLA can operate in parallel because they serve different purposes and use different aggregation tests. Section 206C(1F), however, does not presently impose jewellery-specific 1% TCS. Apply every provision that actually covers the transaction; do not preserve an omitted jewellery-TCS rule in the name of conservatism. (Section 269ST; CBDT section 206C(1F) FAQ)

An employee accepted a ₹2.4 lakh cash advance as a favour to a regular customer. Is the shop exposed?

Yes. A ₹2.4 lakh receipt relating to one jewellery transaction brings section 269ST(b) into play. Internal instructions or an employee’s personal accommodation do not erase receipt by the business. Preserve the evidence and examine the statutory “good and sufficient reasons” defence, but do not treat it as automatic immunity. (Sections 269ST and 271DA)

Does the 1% GST composition scheme make me PMLA-exempt?

No. A 1% GST composition rate, where the business is otherwise eligible, belongs to the GST framework. PMLA status and obligations turn on the notified precious-metal or precious-stone activity, the customer, payment mode, linkage and prescribed threshold—not the GST scheme selected by the dealer. (S.O. 4713(E) and dealer guidance)

Build the control before the notice

HRA’s jeweller compliance engagement integrates the section 269ST jeweller checker and PMLA CTR checker into one recurring cash-control and review rhythm.

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See Also

• EPFO 3.0: Withdraw PF via UPI and ATM from June 2026 — Complete Employer and Employee Guide
• DPDP Rules 2025: The November 13, 2026 Consent Manager Deadline — What Every Indian Business Must Do Now
• Form 26Q is Now Form 140: TDS Returns for Tax Year 2026-27

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