Cash purchases of jewellery will attract 1% tax collection at source from April 1 if the amount exceeds Rs.2 lakh, as against the current threshold of Rs.5 lakh. Once the Finance bill 2017 is passed, jewellery will be treated on a par with general goods, which attract 1% tax at source on cash purchase of above Rs.2 lakh.
The bill seeks to do away with the threshold of Rs.5 lakh on jewellery purchases for applicability of tax collection at source because the Budget 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. However, as there is no special provision for tax collection at source on its purchase, jewellery is now being clubbed with general `goods’ on which 1% tax collection at source is triggered if a single transaction exceeds Rs.2 lakh in cash.
In a bid to check generation of black money through large transactions, after the Budget proposed to scrap the previous threshold of Rs.5 lakh approved by Parliament.
With this move, the tax collection at source threshold for jewellery will be brought on a par with that of bullion from April 1. The income tax department has been levying 1% tax collection at source on cash purchase of bullion in excess of Rs.2 lakh and jewellery in excess of Rs.5 lakh since July 1, 2012.