A parallel plate capacitive (PPC) sensor‐based system is proposed to estimate the Paneer quality as well as to detect adulteration in the Paneer by measuring the dielectric properties of the Paneer. The experimentation on a developed system with various types of Paneer showed that it could characterize Paneer quality in terms of its fat content by preparing it with the addition of skimmed milk powder (SMP) and adulteration with palmolein oil. The results depict that the capacitance of pure buffalo milk Paneer was highest (192.58 μF) and that the capacitance value decreased with increasing SMP content in the Paneer (or decreasing fat content), with the lowest value obtained for 100% SMP Paneer (75.37 μF). It can be observed that the accuracy of the device in detecting various categories of Paneer is significant (>80%). Specificity of the device to detect negative as true negative is also significantly high for all the categories (>0.85).Practical applicationsConventional methods for estimating quality of dairy products are tedious, destructive, and require high‐end laboratory equipment. Therefore, a rapid, non‐destructive, and economical tool was needed. The present work details the development of dielectric capacitive sensor‐based system that can non‐destructively characterize Paneer and is efficient in detecting the adulteration in Paneer in terms of skim milk powder or vegetable oil. There is scope of using the developed system as a guideline for further study on other traditional dairy products such as chhana, yoghurt, condensed milk, khoa and so forth.