UNDER THE TAX LENS

THE INCOME TAX DEPARTMENT HAS ENHANCED ITS ABILITY TO MONITOR AND PROFILE TAXPAYERS IN A BID TO PREVENT TAX EVASION AND WIDEN THE TAX BASE. BUT TAXPAYERS COMPLAIN OF HIGH COMPLIANCE BURDEN AND MISUSE OF POWERS

- BY SURABHI

EFFECTIVE APRIL 22, 2025, the purchase of certain ultra luxury and premium products worth ₹10 lakh or more would attract a 1% tax collected at source (TCS). These include wrist watches, handbags, sunglasses, shoes, sportswear, art objects (including paintings and sculptures), yachts, home theatre systems and horses for racing or polo.

This is the latest in a series of steps by the Central Board of Direct Taxes (CBDT) over the past few years to get information about spending patterns to see if taxpayers are paying up in line with their incomes.

Consider this. The government had, in the Union Budget 202425, introduced a 1% TCS on sale of motor vehicles priced ₹10 lakh or more as well as other goods the central government may specify later. Similarly, it has levied TCS on purchase of foreign tour packages, money transfers or purchases through debit, forex or international cards and foreign remittances above ₹10 lakh, except for the purpose of education. These are in addition to the tax deducted at source (TDS) on several transactions, not only on salary, interest income and rent but also on windfalls such as winnings from online games, betting, lottery and crossword puzzles.

Officials and experts say the aim is not just revenue generation but monitoring of transactions. They look at various expenditure by taxpayers to understand if they are in sync with reported earnings and income tax returns. After all, most such provisions fetch less than ₹1,000 crore in revenue per year. The TCS on ultra luxury goods, for example, is expected to bring in just ₹200-250 crore in a fiscal year.