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FEATURE
De-Tax: Includes individuals
Decoding TCS
As per Section 206C, any person who obtains bullion,
Part of the various measures that the govern- jewellery, other goods/services or motor vehicles is a
ment has been taking to track down black buyer. Hence individual buyers are also included. The idea
money and tax the super rich, is the 'tax collec- behind the move is to discourage cash transactions (which
tion at source' (TCS) on certain high-value pur- are a source of recycling domestic black money) for big-
chases. Budget 2016 brought cash purchase of any goods ticket purchases. The availability of a trail when transac-
or service exceeding a threshold as well as high-value ve- tions are routed through bank channels or through credit
hicle buys into the TCS fold. With TCS on these additional cards will help the government to probe further into the
items from June 1, 2016, the government issued a circular transactions or the assessee's income sources if necessary.
last week giving clarifications on the modus operandi.
Here's what you need to know. As far as the obligation to deduct TCS goes, a seller has
been defined to include individual and HUF, apart from a
Scope widened government, local authority, company, firm, co-operative
society. But only individuals or HUFs who have income
In the last few years, sellers who receive consideration in from business or profession and are liable to tax audit (Sec
cash for sale of bullion and jewellery have been collecting 44AB) in the financial year proceeding the year of sale
1 per cent of the sale value as tax, if the consideration need to deduct TCS. Not only new cars, but purchase of
exceeded Rs. 5 lakh for jewellery and ?2 lakh for bullion. used cars valued over Rs. 10 lakh from eligible sellers will
From June 1, 2016 onwards, consideration above Rs. 2 lakh also be covered under the TCS provisions, according to tax
received in cash for any other goods sold or services ren- experts we spoke to.
dered will also attract TCS of 1 per cent. Consideration in
excess of Rs10 lakh, be it in cash or otherwise, received on So if you are a salaried person and are buying a new car
sale of motor vehicle will be charged a 1 per cent TCS as valued over Rs. 10 lakh you have to pay TCS. But if you sell
well. This implies that all items which attract TCS have the car to another person after sometime, the transaction
become costlier by one per cent now. will not fall under the TCS net as you will not fulfill the
definition of 'individual' applicable in this case.
Although the Finance Minister, in his Budget speech, men-
tioned TCS on luxury cars only, the relevant Section 206C Part payments
(amended as per Finance Act 2016), does not specifically
mention luxury cars; instead, it uses the term motor ve- Since vehicles are big-ticket purchases, it is not uncommon
hicles. Hence, you may be liable to pay TCS if you buy SUVs to find buyers making an initial down-payment and then
or even super bikes. making the rest of the payment on delivery either through
a loan or from own funds. The tax department's FAQs
TCS is calculated on the invoice value in case of bullion or clarify that in case the total sale value exceeds Rs. 10
jewellery or other goods/services. But for motor vehicles, lakh, TCS shall be collected each time a payment is made.
TCS could be calculated on the on-road price rather than So if your car cost Rs. 12 lakh and you pay Rs. 1 lakh at the
the ex-showroom price, says Neha Malhotra, Executive time of booking and the rest on delivery, TCS of 1 per cent
Director, Nangia &Co., Chartered Accountants. The value will be collected at both times separately. Similar rules
at which the asset is capitalised and put to use is what apply to other items under the TCS net as well.
should be considered as sale price, according to her.
Secondly, as far as a vehicle purchase is concerned, making
part of the payment in cash and the rest through other chan-
nels doesn't make a difference as all purchases above Rs. 10
lakh, be it cash or otherwise, falls under the TCS ambit.
But consider a vehicle costs Rs. 9 lakh and you make a part
cash payment of over Rs. 2 lakh or even fully pay in cash.
Here, you have not crossed the Rs 10 lakh limit. But you
will still have to bear a 1 per cent TCS. This is because of
the other rule on making TCS compulsory for purchase of
all goods and services for which consideration above Rs. 2
lakh has been paid in cash. (Source: Business Line)
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