Cash purchases of jewellery will attract one percent TCS (tax collected at source) from April 1 if the amount exceeds Rs two lakh, as against the current threshold of Rs five lakh.
Once the Finance Bill 2017 is passed, jewellery will be treated on par with general goods which attract one percent TCS on cash purchase of above Rs two lakh.
The Bill seeks to do away with the threshold of Rs five lakh on jewellery purchases for applicability of TCS because the Union Budget 2017-18 has proposed to ban cash dealings of over Rs 3 lakh and make violations punishable with a penalty of an equivalent amount to be paid by person receiving the cash.
However, as there is no special provision for TCS on its purchase, jewellery is now being clubbed in general ‘goods’ on which 1 percent TCS is triggered if a single transaction exceeds Rs 2 lakh in cash.
In a bid to check generation of black money through large transactions, after the Budget proposal to scrap the previous threshold of Rs 5 lakh is approved by Parliament “The Income-tax Act provides for one percent TCS on cash purchase of goods or services above Rs two lakh. The definition of goods also includes jewellery and hence one percent TCS would be applicable on jewellery purchased above Rs two lakh in cash,” an official said.
With this move, the TCS threshold for jewellery will be brought at par with that of bullion from April 1.
The Income Tax Department has been levying one percent TCS on cash purchase of bullion in excess of Rs. two lakh and jewellery in excess of Rs. five lakh since July 1, 2012.
However, the Budget for 2016—17 had imposed TCS of one percent on goods and services purchased in cash over Rs. two lakh.
The Finance Bill 2017 states that current provisions provide for “tax collection at source at the rate of one percent 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“.
Currently, Section 206C sub section (1D) of Income Tax Act, 1961 provides for a seller collecting from the buyer one percent of sale consideration as income tax if the amount paid for bullion exceeds Rs. two lakh in cash and for jewellery if it exceeds Rs. five lakh in cash.
The same section also provides for one percent TCS on cash paid in excess of Rs. two lakh for any goods other then bullion and jewellery.
With the amendment proposed in the Finance Bill 2017, jewellery purchase of over Rs. five lakh in cash is being omitted from the ambit of TCS but will now be classified as “other goods” and the one percent levy be provided if cash consideration is over Rs. two lakh.