Art buffs catch taxman eye | business | Hindustan Times
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Art buffs catch taxman eye

The scanner will now be on art collectors and painters to trace the source of black money in the system, say sources.

business Updated: Apr 27, 2007 21:16 IST

The income tax surveys carried out at last week on art galleries and funds are likely to be the first act of the show. Sources indicate that the scanner will now be on art collectors and painters to trace the source of black money in the system.

While the market for paintings is estimated at around Rs 2,000 crore, the black economy in art is seen at somewhere almost equal that size.

Renowned painter Dipali Bhattacharya says, "Art is not about enjoyment anymore. It is more about making money and resembles the share market in many ways. A lot of art is now bought solely as an investment and loose cash abounds."

Sources say that apart from the source of black money, the income tax department was also looking at price rigging at auctions and online bidding. Apart from that, art has been a convenient way to launder money.

This has been plugged in this year’s budget. Anish Mehta of Haribhakti Group explains, "Drawings, paintings and sculptures are now classified as capital assets, subject to capital gains tax. Earlier, these were considered personal effects and profits from the sale of these, if any, were not taxed at all."

While a section of the art market, like Ajay Sheth of the Copal Art Fund, feels the raids have created panic, others, like Ashis Balram Nagpal, feel that it will not affect business. "Everything we do is on the basis of cheques," Nagpal said.

However, it is nobody’s case that the big galleries record all their transactions. It is beyond that where the colour of money changes.

Bhattacharya adds, "There is a lot of cash floating around with small galleries making a lot of payments in cash." Nothing is regulated and nothing is logical, she stresses.

A chartered accountant who knows the art world, says on conditions of anonymity, "The cost of transactions must come down. Large galleries charge 33 per cent from artists to sell their paintings. However, for established artists they bring this down to even 10-12 per cent. The high commission often drives younger and less established artists to sell for cash, without a receipt."