A variety of luxury items, including wristwatches, handbags, shoes, sunglasses, art, paintings, and home theater systems, priced over Rs 10 lakh will now be subject to tax collected at source ( TCS). This policy change is part of the government's initiative to enhance oversight of high-value transactions and broaden the tax base, The Times of India reported on April 24.
The Central Board of Direct Taxes ( CBDT) has announced ten categories of products that will be affected by these new TCS regulations. Among these categories are racing horses, yachts, helicopters, gold kits, and ski equipment.
With this new regulation in place, buyers of these luxury goods will be required to pay a TCS of 1% at the time of purchase. This is similar to the existing policy for vehicles that exceed Rs 10 lakh in price. The government's strategy aims to increase the number of taxpayers in the nation and encourage more accurate income reporting.
It may be noted here that many business owners and professionals have historically underreported their earnings to evade taxes, which has led tax authorities to broaden the scope of TCS and tax deducted at source.
Data collected by the tax department allows for a comparison between tax returns and consumer purchases. Taxpayers may find themselves prompted to pay the correct tax amount, with an option to revise their returns if discrepancies are found.
The department has also gathered information on various other acquisitions and investments, such as real estate and financial products, to monitor those who may not be fully disclosing their income.
"This notification broadens the TCS framework to encompass luxury goods and collectibles... This will improve the ability to track luxury expenditures," ToI's report said quoting Amit Maheshwari, a tax partner at AKM Global, a tax consulting firm. The new provisions are effective immediately as of Tuesday.
Additionally, this initiative is expected to enhance the scrutiny of sellers. In recent years, the income tax department has conducted extensive investigations and discovered significant cash transactions associated with high-value purchases, particularly in designer clothing and watches, some of which were suspected of being smuggled into the country.
The Central Board of Direct Taxes ( CBDT) has announced ten categories of products that will be affected by these new TCS regulations. Among these categories are racing horses, yachts, helicopters, gold kits, and ski equipment.
With this new regulation in place, buyers of these luxury goods will be required to pay a TCS of 1% at the time of purchase. This is similar to the existing policy for vehicles that exceed Rs 10 lakh in price. The government's strategy aims to increase the number of taxpayers in the nation and encourage more accurate income reporting.
It may be noted here that many business owners and professionals have historically underreported their earnings to evade taxes, which has led tax authorities to broaden the scope of TCS and tax deducted at source.
Data collected by the tax department allows for a comparison between tax returns and consumer purchases. Taxpayers may find themselves prompted to pay the correct tax amount, with an option to revise their returns if discrepancies are found.
The department has also gathered information on various other acquisitions and investments, such as real estate and financial products, to monitor those who may not be fully disclosing their income.
"This notification broadens the TCS framework to encompass luxury goods and collectibles... This will improve the ability to track luxury expenditures," ToI's report said quoting Amit Maheshwari, a tax partner at AKM Global, a tax consulting firm. The new provisions are effective immediately as of Tuesday.
Additionally, this initiative is expected to enhance the scrutiny of sellers. In recent years, the income tax department has conducted extensive investigations and discovered significant cash transactions associated with high-value purchases, particularly in designer clothing and watches, some of which were suspected of being smuggled into the country.
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