New Delhi: A host of luxury goods – from wristwatches, handbags, and shoes to sunglasses, art pieces, paintings, and home theatre systems – that cost over Rs 10 lakh will now attract tax collected at source (TCS) as govt steps up scrutiny of high-value transactions to expand the tax base.
Late Tuesday, the Central Board of Direct Taxes (CBDT) notified 10 product categories where the new TCS provisions would apply, with horses for racing, yachts, helicopters, gold kits, and ski gear also on the list. The move means that those buying these items will have to pay the prescribed 1% TCS while making the purchase and take credit for it, just as is the case with cars that cost more than Rs 10 lakh.
The move comes amid efforts to increase the number of taxpayers in the country and get them to disclose their income accurately. Businessmen and professionals often under-report their income to avoid paying taxes, prompting tax authorities to widen the ambit of TCS and tax deducted at source.
Based on the data received by the department, tax returns are matched with the purchases made, and often taxpayers are nudged to cough up the right amount of tax with a provision allowing them to update their returns. It also received information on other purchases and investments, including property and financial instruments, to track those who are not accurately disclosing their income.
“This notification expands the scope of TCS to include luxury goods and collectibles… This will enhance the traceability of luxury spending,” said Amit Maheshwari, tax partner, AKM Global, a tax and consulting firm. The notification is effective Tuesday.
The move will also help tighten the scrutiny of sellers. Over the last few years, the income tax department has also undertaken extensive surveys and come across widespread use of cash in high-value purchases, including those related to designer wear and watches, some of which were suspected to be smuggled into the country.