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Old 27th May 2016, 16:09   #31
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Default Re: 1% TCS on vehicles above Rs. 10 lakh from June 1, 2016

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Originally Posted by classic86 View Post
Or not. People could just use cash or some part cash in the transaction to keep the overall value below Rs. 10 lakhs. I only see this increasing the presence of black money further
How's that possible? This can be done in real estate transactions maybe, but in case of car purchase? you can't buy a 25 lakh car, pay 16 lacs in cash, and documents show 9 lacs ex showroom
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Old 27th May 2016, 16:10   #32
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Default Re: 1% TCS on vehicles above Rs. 10 lakh from June 1, 2016

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Originally Posted by GTO View Post
You cannot buy a brand new car with unaccounted cash. Every car is accounted for in this country. One of the few big ticket items that are bought 100% officially.

Even if you pay 4 lakhs in cash & 6 lakhs via cheque, you'll still have to pay TCS. The dealer will declare that entire 10 lakhs.
I was talking about used cars that cost more than 10 lakhs
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Old 27th May 2016, 16:28   #33
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Default Re: 1% TCS on vehicles above Rs. 10 lakh from June 1, 2016

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Originally Posted by apachelongbow View Post
They must apply same idea to second hand car as well.. that will truly stop black money circulation
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Originally Posted by classic86 View Post
I was talking about used cars that cost more than 10 lakhs
The rule does not specify anywhere that TCS is to be collected only by the dealers. The rule is
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Every person, being a seller, who receives any amount ....
. The interpretation, at this time is, that this will be applicable for second hand car sale also.

But this will make the things complicated because you cannot collect/ deposit TCS without a TAN.
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Old 27th May 2016, 16:34   #34
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Default Re: 1% TCS on vehicles above Rs. 10 lakh from June 1, 2016

A farmer who earns 50 lakhs doesnt have to file income tax. Now he has to do it to reclaim the 1% he paid
Other than IT department getting to know more people, what purpose is this really serving?

Make PAN card compulsory and have that used for everything (they do it currently only for high value transactions). For all this to work, the sellers have to be accounted properly. They need to track from wholesale to retail and to customers and make sure every step is legally recorded and accounted for.
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Old 27th May 2016, 18:15   #35
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Smile Re: 1% TCS on vehicles above Rs. 10 lakh from June 1, 2016

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Originally Posted by GTO View Post
The purpose of that was to increase tax collection.

The purpose of the TCS is to increase the base of tax-paying citizens.
I thought the purpose of TDS for real estate transactions was also to increase the base of tax-paying citizens.

I am guessing, only the biggies in the business (Hiranandani, Purva, Sobha etc), report all their sales and pay all dues to the Govt. exchequer. The small time builders and individual sellers may or may not do it at-all!

Also, I am not sure if all states require buyer/seller's PAN details at the time of registration. So, the possibility of them (sub-registrars of state govts) reporting asset purchase to the IT dept is perhaps bleak. Although, I could be grossly mistaken.

Anyway, based on the above assumptions, my inference was that when buyers of properties deposit 1% of the transaction to the IT dept, the sellers automatically enter the tax net. Also, if the net profits/income made by the seller of property is not taxable, he can always claim back the tax credit.

So, in summary, I believe that the intent of both the moves is the same which is to widen the tax base! Am I wrong?
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Old 27th May 2016, 18:28   #36
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Default Re: 1% TCS on vehicles above Rs. 10 lakh from June 1, 2016

Appreciate the efforts by the government to introduce such taxation schemes so as to streamline more IT filling, but these measures will not really bring down the real evaders to turn into a new leaf. As some of Teambhp members have suggested making PAN mandatory will be a good move.

In the recently completed TN elections, 100's of candidates filled affidavits without even PAN details but had wealth and income to the tune of several crores( not including farmers, they were so called 'social workers') and still they were allowed to contest. What kind of a joke is this?
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Old 27th May 2016, 18:49   #37
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Default Re: 1% TCS on vehicles above Rs. 10 lakh from June 1, 2016

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Originally Posted by naut View Post
I thought the purpose of TDS for real estate transactions was also to increase the base of tax-paying citizens.

I am guessing, only the biggies in the business (Hiranandani, Purva, Sobha etc), report all their sales and pay all dues to the Govt. exchequer. The small time builders and individual sellers may or may not do it at-all!

Also, I am not sure if all states require buyer/seller's PAN details at the time of registration. So, the possibility of them (sub-registrars of state govts) reporting asset purchase to the IT dept is perhaps bleak. Although, I could be grossly mistaken.

Anyway, based on the above assumptions, my inference was that when buyers of properties deposit 1% of the transaction to the IT dept, the sellers automatically enter the tax net. Also, if the net profits/income made by the seller of property is not taxable, he can always claim back the tax credit.

So, in summary, I believe that the intent of both the moves is the same which is to widen the tax base! Am I wrong?
PAN details are essential for property registration. Even though I had mentioned it, I got a communication from IT department saying that I had made a high value transaction and they require my PAN card details :(
Looks like their ways of managing data is not good.
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Old 27th May 2016, 19:03   #38
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Default Re: 1% TCS on vehicles above Rs. 10 lakh from June 1, 2016

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Originally Posted by srishiva View Post
PAN details are essential for property registration. Even though I had mentioned it, I got a communication from IT department saying that I had made a high value transaction and they require my PAN card details :(
Looks like their ways of managing data is not good.
Yep! you are right. It has been there for some time now in Karnataka (disclosure of PAN for property purchase). In your case, the IT notice might have come due to a disclosure from the bank side rather than the Sub-registrar's side.

Let me explain. The banks are supposed to intimate the IT dept if the transaction in an account exceeds 10 L or so (This part, I know for a fact, I might wrong about the exact limit). As a result, they might have notified the IT dept, the state govt might not have done anything! Hence the IT dept couldn't connect the dots resulting in a notice to you . Perhaps also the reason why IT dept brought in the TDS concept for property purchases, to plug cases such as buyer paying in cash etc where in there'd be no disclosure even from banks!

Since, I was not sure of this in all states, I mentioned the below! Hope it clarifies.

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Originally Posted by naut View Post
Also, I am not sure if all states require buyer/seller's PAN details at the time of registration. So, the possibility of them (sub-registrars of state govts) reporting asset purchase to the IT dept is perhaps bleak. Although, I could be grossly mistaken.
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Old 27th May 2016, 19:29   #39
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Default Re: 1% TCS on vehicles above Rs. 10 lakh from June 1, 2016

The more i think about this scheme, the more clever it seems.

- The tax cheats like to burn cash. One of the big cash burn source used to be cars. Raise your profile, improve your lifestyle, get that flashy car (why else are you making money otherwise) etc. So the net to capture black money is cast very wide. This won't just catch a small population.

- Those guys will now pay 1% of their purchase to govt. Even if they don't pay income tax later, that 1% money is that much more govt has earned which it would have otherwise.

- Even if IT return is eventually filed (like some said, under-declare income etc. but file the return), the tax authorities can easily discern the discrepancy. "Filing tax on income worth 50 lakhs and buying a car worth 50 lakhs?!?!.. Hmm" AT THE VERY LEAST, the tax cheat will need to get more innovative to hide his loot.

I have a feeling genuine tax paying relatives will soon have a lot of cars being bought in their names

Last edited by Vitalstatistiks : 27th May 2016 at 19:31.
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Old 27th May 2016, 20:00   #40
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Default Re: 1% TCS on vehicles above Rs. 10 lakh from June 1, 2016

This is being done for compliance reasons. And i am happy that compliance is happening . Government needs to know about your big ticket spends. TCS is over 10 Lacs. However even for purchasing a vehicle of smaller amount, you still need to provide PAN details, atleast here in Mumbai.

Similar thing i believe is happening in Jewellery and Gold if i am not mistaken. There was some stir about Jewellers and some sort of strike a while back.

Big ticket Credit card spends get declared in AIR. Mutual fund investments over 2 lacs a year get declared in AIR. Property already has TDS and you have to mandated to file form 26QB. Non filing invites notice.

The three biggest areas where cash were used for purchases were 1. Expensive Cars . 2. Expensive Jewellery and 3. Real Estate.

The government has tightened the screw on all of them.
While i am happy with the compliance, there is often garbage data collection that does not co relate. This also invites an enquiry fom IT. And its not pleasing to get the brown envelope at home .

However what is still happening is that for luxury cars ( 50 Lac plus ), in the pre owned market, a large percentage of payment is happening in cash. Atleast 40 to 50 percentage of payments happen in cash and thats still a way that people are able to utilise their black money.

Off topic but i imagine how Political parties are operating these days. Recently there were state elections in 4 states and the volume of cash in the country was at an all time high. How do they manage these things.
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Old 27th May 2016, 21:57   #41
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Default Re: 1% TCS on vehicles above Rs. 10 lakh from June 1, 2016

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Originally Posted by Nav-i-gator View Post
Interesting!

Actually, <3% of all Indians file Income tax return every year. That's like

And in such case, Scenario 3 does look quite effective.
Car ownership in India is also very low. It is under 2% as well.
Regarding low percentage of people filing tax returns, the deductions allowed are quite high compared to income levels. With the 2.5 lakh exemption allowed, a person earning up to 20k per month doesn't need to pay tax. Hence it is easy for someone earning even double that amount to claim it to be under 250k per year. It gets easier when you put some income in the name of your spouse as now you can legally earn up to 50k per month tax free. A lot of families do not have incomes over 50k per month in India. If we compre the standard deduction in India to the US, there it is 6k $ or slightly under Rs 4 lakhs. Until Rupee devaluation, it was actually the same as Indian deduction of 2.5 lakhs. However, the US incomes are dozens of times higher than those in India and thus having a similar exemption in India is rather generous and alllows a lot of people to escape the tax net.

One way out would be is to have a mandatory Rs500 minimum in tax from each working adult per year. All public assistance, subsidies, driving licence, bank accunt etc. can be made dependent on having the proof of this tax payment. Then this amount can be slowly increased to Rs 1000 and so on. Now you would have the details of each working adult and their professed occupation and incomes.
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Old 28th May 2016, 08:49   #42
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Default Re: 1% TCS on vehicles above Rs. 10 lakh from June 1, 2016

@Lobogris, I agree. There should be some minimum tax that everyone should pay and force everyone to file their income tax and have a PAN card for this.

Currently even if they pay TCS, they wont have any tax record to check against automatically.

Any spend of above a limit should automatically check against tax filing status and red flag if none is found.
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Old 28th May 2016, 10:01   #43
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Default Re: 1% TCS on vehicles above Rs. 10 lakh from June 1, 2016

I don't think this is an "out of the box" thinking rule, which would benefit the exchequer. Anyway for buying new cars above 5 lacs we need to submit PAN number, and the govt can use that to track tax evaders if they really need to do so. People who are determined not to pay income taxes, will remain to do so and wouldn't care for the 1% loss as paying IT would be more damaging to them. This just adds on more paper work for tax paying citizens like most of us and of course the only helpful bit is that govt gets some additional revenue like a deposit with a fixed term.
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Old 28th May 2016, 10:39   #44
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Default Re: 1% TCS on vehicles above Rs. 10 lakh from June 1, 2016

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Originally Posted by naut View Post
I am guessing, only the biggies in the business (Hiranandani, Purva, Sobha etc), report all their sales and pay all dues to the Govt. exchequer. The small time builders and individual sellers may or may not do it at-all!
Bigger you are, the more the chances you are evading taxes.
The IAS officer DK Ravi was probing this evasion, before committing suicide

http://www.bangaloremirror.com/banga...w/46448581.cms

http://realty.economictimes.indiatim...jarat/47046452

https://ecopackindia.wordpress.com/t...-at-bangalore/

http://www.bangaloremirror.com/banga...w/45768039.cms

http://timesofindia.indiatimes.com/c...w/45905461.cms
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Old 28th May 2016, 10:47   #45
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Default Re: 1% TCS on vehicles above Rs. 10 lakh from June 1, 2016

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Originally Posted by Nav-i-gator View Post
How's that possible? This can be done in real estate transactions maybe, but in case of car purchase? you can't buy a 25 lakh car, pay 16 lacs in cash, and documents show 9 lacs ex showroom
Off Topic but even in Real Estate Transactions like buying of Flats, the Recknor rates are now fairly close to the market value of properties in most of Maharashtra. Your property document needs to have the value at a minimum of the ready recknor rate. Atleast this is true in Mumbai and Pune. So buying half the value of your flat in cash is not possible any more. 10-20 Percent, may be.

In Real Estate transactions of Land Purchase and sale, that's a different story.
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