Asia & Australia

February 20, 2017

Jewellery Purchase By Cash Amount Exceeding Rs 2 Lakhs To Attract 1% TCS From April 1


From April 1 onwards, jewellery purchased by cash amount exceeding Rs 2 lakhs will attract 1% TCS (Tax Collected at Source); the current threshold is Rs 5 lakhs.

TCS is income tax collected by seller in India from payer on sale of certain items (including alcoholic liquor for human consumption including Indian Made Foreign Liquor (IMFL); tendu leaves; timber obtained under a forest lease; timber obtained by any mode other than under a forest lease; any other forest produce not being timber or tendu; scrap (waste from the manufacture or mechanical working of materials, which is usable as such because of breakage, cutting up, wear and tear, and other reasons); licensing or leasing of parking lot, toll plaza; and mining and quarrying). The goods are as specified under Section 206C of the Income Tax Act, 1961.

Once the Finance Bill 2017 is passed, jewellery will be treated on par with general goods, which attract 1% TCS on cash purchases exceeding Rs 2 lakhs, as there is no special provision for TCS on its purchase and 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 a person receiving the cash. This move will bring the TCS threshold for jewellery at par with that of bullion from April 1.

According to the bill, current provisions provide for "tax collection at source at the rate of one percent of sale consideration on cash sale of jewellery exceeding Rs 5 lakhs. It is proposed to omit the said clause in view of restriction on cash transactions as proposed to be provided."

At present, sub-section (1D) of Section 206C of the Income Tax Act, 1961 provides for a seller collecting from a buyer 1% of sale consideration as income tax if the amount paid for bullion exceeds Rs 2 lakhs in cash and for jewellery if it exceeds Rs 5 lakhs in cash. The section also provides for 1% TCS on cash paid above Rs 2 lakhs for any goods other then bullion and jewellery.

With the amendment proposed in the bill, jewellery purchase of above Rs 5 lakhs in cash is being omitted from the ambit of TCS but will now be classified as "other goods" and 1% levy will be provided if cash consideration is above Rs 2 lakhs.

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