To curb domestic black money generation, income tax authorities plan to intensify measures to ensure tax compliance by jewellery and real estate players.

According to officials, collections through Tax Deduction at Source (TDS) in the real estate sector and Tax Collection at Source (TCS) in the bullion sector are much below estimates which, they feel, could be an indication of black money generation in these sectors.

The size of the bullion and jewellery market is estimated at ₹3 lakh crore. However, “tax is being collected at source on sale of bullion and jewellery amounting to only ₹300 crore at all-India level.” Officials said only 0.01 per cent of the total market turnover is being captured in the TCS net, which is ‘abysmally low.’ They also pointed to a 68 per cent reduction in TCS on sale of jewellery and bullion, while gold imports were at an all-time high.

Across the country, TCS is being collected by only 249 jewellers, with Mumbai topping with 37 jewellers. TCS is a mode of tax payment where the buyer has to pay a certain amount over and above the price of a commodity. For example, if a commodity price is ₹100 and the TCS rate is 1 per cent, the buyer will have to pay ₹101.

TCS on bullion and jewellery is being levied from July 1, 2012. The purpose behind this tax is to reduce the quantum of cash transaction in the sector and curbs the flow of unaccounted money in the trading system. It is levied at the rate of 1 per cent on cash purchase of jewellery worth ₹5 lakh or more and bullion worth ₹2 lakh or more. The plan is now to enhance verification in various cities to ensure compliance.

Immovable property

At present, a buyer of immovable property (other than agricultural land) is required to deduct tax at the rate of 1 per cent on payment to the seller when the value of such property is ₹50 lakh or more. This provision came into effect from June 1, 2013. It was proposed that a buyer needs to show a TDS certificate to the sub-registrar after which the property will be registered. Tax officials, however, admitted that there is challenge in ensuring compliance in this area, as the “sub-registrars do not insist on TDS at the time of registration.” Since buying and selling property is a State subject, thorough compliance is only possible if there is specific requirement in the Transfer of Property Act or any other Act.

Officials said a few State governments have issued such orders. Keeping that in mind, the tax department plans to take up the issue with the remaining State governments, seeking issuance of proper notifications to ensure compliance.

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