TCS on luxury goods in India: Get ready for a new tax implication if you’re eyeing luxury goods priced above ₹10 lakh. Starting April 22, 2025, a 1% Tax Collected at Source (TCS) will be applicable on luxury goods in India. This change comes as a result of amendments made in the Finance Act, 2024.
The Central Board of Direct Taxes (CBDT) has recently released updated guidelines outlining the implementation of this levy. The primary goal behind this move is to curb tax evasion and enhance transparency regarding significant transactions.
So, what kind of purchases are we talking about? Think designer handbags, exquisite vintage watches, luxurious yachts, and even racehorses. If the price exceeds the ₹10 lakh threshold, the seller will now be responsible for collecting this 1% TCS from you and depositing it under your Permanent Account Number (PAN).
The good news for buyers is that this collected tax isn’t an additional cost in the long run. Similar to the Tax Deducted at Source (TDS) system for salaries, you can claim credit for this TCS when you file your income tax returns. This ensures that the tax paid at the time of purchase is adjusted against your overall tax liability.
What changes were brought in section 206C(1F) of the Income Tax Act, 1961 through
Finance (No. 2) Act, 2024?
Earlier, Section 206C(1F) provided for collection of tax at source (TCS) on sale of motor
vehicle of value exceeding ten lakh rupees.
Vide Finance (No. 2) Act, 2024, section 206C(1F) was amended to provide that TCS will also be levied on any other goods of value exceeding ten lakh rupees, as may be notified by the Central Government in the Official gazette.
What are the items that are likely to invite TCS levy
In a notification dated April 22, the Income Tax Department has notified the new rules for the levy of TCS on sales of these luxury items priced over Rs 10 lakh. As per the list shared by the Department,
- Luxury wristwatches
- Artworks and antiques, including paintings and sculptures
- Collectibles like rare coins and stamps
- Boats, yachts, canoes, and helicopters
- High-end handbags, sunglasses, and designer shoes
- Premium sports gear such as golf kits and ski wear
- Home theatre system
- Horses used in racing and polo
Whether TCS will be levied on sale of a single item of the notified goods of value
exceeding ten lakh rupees ?
Yes, TCS will be levied on sale of a single item of the goods of the nature specified in the
above table which is of the value exceeding ten lakh rupees.
When will the new provisions become effective?
The new provisions will become effective from the date of publication of notification i.e.
22.04.2025.
The new tax rule mandates that Tax Collected at Source (TCS) is applied to the entire transaction value—not just the amount exceeding ₹10 lakh. So, if you’re making a purchase worth ₹25 lakh, the TCS would be ₹25,000, calculated at 1% of the total value. This approach aligns with existing norms already in place for high-value transactions like luxury cars and premium vehicles.
Beyond the financial cost, buyers can expect stricter documentation and compliance measures at the time of purchase. Sellers will likely insist on a valid PAN and may request additional KYC documents to ensure smooth processing. Once the tax is collected and deposited, buyers will receive a TCS certificate, which can be used when filing their income tax returns to claim credit.
However, this measure is not just about boosting tax revenue. It’s a strategic move aimed at creating a traceable record of high-value spending. By capturing digital footprints of luxury consumption, the government is working to expand the tax net, improve transparency, and monitor spending habits among affluent and aspirational consumers.
Following the Budget 2024-25 presented in July 2024, which outlined amendments to Section 206C of the Income-tax Act, the Finance Act, 2024 has expanded the scope of Tax Collected at Source (TCS).
Previously, a 1% TCS was already in effect from January 1st of this year for the sale of motor vehicles priced above ₹10 lakh. Now, this levy has been extended to encompass “any other goods” as specified by the Central government through notification.
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