PAN card requirement be extended to all gold transactions-Household Finance Committee

PAN card requirement be extended to all gold transactions, daily cash limits against gold sale, electronic registry etc. suggests Household Finance Committee

PAN card requirement be extended to all gold transactions

RBI has released the report of the Household Finance Committee. The Household Finance Committee was set up to look at various facets of household finance in India.

The Committee was chaired by Dr. Tarun Ramadorai, Professor of Financial Economics, Imperial college London, with representation from all the financial sector regulators, namely, Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), the Insurance Regulatory and Development Authority of India (IRDAI) and Pension Fund Regulatory and Development Authority (PFRDA).

The committee has Highlighted the unique aspects of Indian households’ financial decision-making. It has also set out several recommendations on enabling better participation by Indian households in formal financial markets, including a Regulatory Sandbox for assessing the role of new financial technologies and products.

As per the report of the household committee, the average Indian household holds 84% of its wealth in real estate and other physical goods, 11% in gold and the residual 5% in financial assets. Whereas retirement accounts play a very limited role in household balance sheets, even at the top of the wealth distribution.

The committee has noted that gold is a preferred asset for tax evasion purposes. To curb it, the committee has proposed as under:

(a) The PAN card requirement for gold transactions from jewellers be extended to all transactions, and not just those that are above Rs. 2,00,000

(b) The daily cash limits against the sale of gold.  However the committee has cautioned that taking a holistic perspective on household balance sheets that these cash limits should be complemented with measures to ensure that unsecured credit is widely available to households at favourable rates in the event of emergencies.

(c) To prevent PAN requirement driving gold transactions underground, all gold transactions should be registered using an electronic registry such as a depository.

(d) A more incisive use of income tax data required to detect tax avoidance, and

(e) Enforcement of tax avoidance should be strict.

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