Car Purchase Via cash to attract 1 per cent Tax Collected at Source (TCS)

The tax will also apply to cars that cost more than Rs. 10 lakh.

Now, buyers of cars will have to pay 1% tax for every car purchase via cash of more than Rs. 2 lakh. The tax will also apply to cars that cost more than Rs. 10 lakh. The onus is on the car dealers to collect this tax for the sale of motor-vehicles exceeding the price of Rs. 10 lakh or purchased with cash of more than Rs. 2 lakh. This comes after the Finance Minister Arun Jaitley’s budget speech where he announced the levy of 1% Tax Collected at Source (TCS) on cars priced higher than Rs. 10 lakh and for cash purchases of more than Rs. 2 lakh. The Central Board of Direct Taxes (CBDT) states that the 1% tax will be collected at source by the dealers for cash payments of more than Rs. 2 lakh and purchase of cars priced higher than Rs. 10 lakh under the new amendment in the Finance Act, 2016, which offers more scope for Section 206C of the Income Tax Act to levy the tax. This is part of the Prime Minister Narendra Modi’s Government’s efforts to eliminate the circulation of black money in India. The TCS will also be levied not only on cars but on the sale of all higher-end goods and services priced higher than Rs. 10 lakh and if purchased using cash of more than Rs. 2 lakh. This applies to all motor-vehicles as cars, premium cars and premium two-wheelers. However, the tax applies only for retail sales and not for the transactions among the manufacturers, dealers and distributors. So, this new provision of TCS will not hike the prices of cars, motor-vehicles, two-wheelers and automobiles. This move by the Central Government is intended to eliminate the circulation of black money in India in the domestic circuits and it is hoped that this provision will completely eliminate the circulation of black money in India.