New Delhi, February 20: Come April and get ready to shell out more out of your pocket if you make a jewellery purchase of Rs 2 lakh or more in cash.
From April 1, jewellery purchases above Rs 2 lakh in cash will attract 1 per cent tax collected at source (TCS) as against the current limit of Rs 5 lakh.
Tax Collected at Source is basically income tax that is collected by seller in India from payer on sale of certain items.
The Finance Bill 2017 seeks to treat jewellery buying at par with general goods which attract 1 per cent TCS on cash buyings above Rs 2 lakh.
Post demonetisation, the central government has been rampant on promoting digital payments and disincentivising cash transactions. Union Budget 2017-18 proposes to ban cash dealings over Rs 3 lakh and make cash transactions punishable with a penalty of an equivalent amount for person receiving the cash.
The Finance Bill 2017 sought “tax collection at source at the rate of one per cent of sale consideration on cash sale of jewellery exceeding Rs five lakh. It is proposed to omit the said clause in view of restriction on cash transactions as proposed to be provided.”
The parliament has already approved budget proposal to scrap the previous threshold of Rs 5 lakh cash buying so as to check big transactions aimed to park black money.
A government official confirms the news and says, “The Income—tax Act provides for 1 per cent TCS on cash purchase of goods or services above Rs 2 lakh. The definition of goods also includes jewellery and hence 1 per cent TCS would be applicable on jewellery purchased above Rs 2 lakh in cash.”
Since July 1, 2012, under Section 206C sub section (1D) of Income Tax Act, Income Tax department has been levying 1 per cent TCS on cash purchase of bullion in excess of Rs 2 lakh and jewellery in excess of Rs 5 lakh. The same section also provides for 1 per cent TCS if cash is paid in excess of Rs 2 lakh on other items.
With proposed amendment in the Finance Bill 2017, jewellery purchase of over Rs 5 lakh in cash is being omitted from the ambit of TCS and will be classified as “other goods” and 1 per cent TCS will be levied if cash transaction is over Rs 2 lakh.