New Delhi: Buying gold jewellery worth over Rs 2 lakh with cash will now attract one per cent tax collected at source (TCS) from April 1 to tackle the problem of black money.
In the Union Budget last year, the government had imposed TCS of one per cent for purchase of goods and services over Rs 2 lakh with cash from April 1, 2016. However, tax collected at source on gold jewellery was raised for cash payment to over Rs 5 lakh from June 1,2016.
The Finance Bill 2017 now seeks to do away with the threshold of Rs 5 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.
Under TCS, the seller will be required to collect an additional 1 per cent from the purchaser, and pay it to the government. This means that if you use cash to purchase gold worth over Rs 2 lakh, you will now have to pay extra money which can later on be claimed as a credit at the time of paying income-tax. For a consumer this only advances payment of income- tax.
However, since the transaction is reported to the income-tax department it also helps in curbing black money investment in gold. TCS of one per cent is applicable on cars if the value of vehicle is above Rs 10 lakh.
The Centre 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 since July 1, 2012. Gold, besides real estate is one of the favourite instruments to hoard black money.
The National Institute of Public Finance and Policy (NIPFP) report in 1985 pointed out that gold was the third favourite instrument to hoard black money in India after real estate and stocks.
A white paper by the finance ministry in 2012 had said that gold was also targeted by the black money hoarders as it protects the value of their black money from inflationary depreciation.
