New rules notified by the Indian Government have made it compulsory for citizens to furnish know your customer documentation at the time of buying gold worth Rs 50,000 or more. This limit has been reduced from Rs 2 lakh previously.
These restrictions are imposed under the Prevention of Money Laundering Act (PMLA). Though the traders and jewellers are foreseeing the harassment at the hands of authorities the real reason seems to be to control the import of gold. Reduced demand for gold may work in favour of the government as large import of the gold blamed for stretching India’s fiscal deficit. India is actually losing on tax revenue as demand is shifting from official routes to unofficial channels such as smuggled gold.