The income tax department has officially notified that 1% TCS (Tax Collected at Source) is now applicable on sale of certain luxury goods, if the selling price breaches Rs 10 lakh mark. This is effective from April 22, 2025. Luxury goods, which will be subject to 1% TCS, include handbags, wristwatches, footwear and sportswear, which cost above Rs 10 lakh.
The provisions for TCS on such luxury goods were introduced in the Finance Act, 2024, in the Budget presented in July 2024.
The TCS will be collected by the seller. The luxury goods, which are notified as the subject of 1% TCS, include wristwatches, art objects like paintings, sculptures, antiques, collectible items like coins and stamps, yachts, helicopters, luxury handbags, sunglasses, footwear, high-end sportswear & equipment, home theatre systems, and horses intended for racing or polo.
According to the tax experts, the move to levy TCS on luxury goods will help enlarge the tax base. Experts say that the buyers of such luxury goods may face extra KYC requirements.
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What More?
“This notification operationalises the government’s intent to enhance monitoring of high-value discretionary expenditure and strengthen the audit trail in the luxury goods segment. It reflects a broader policy objective of expanding the tax base and promoting greater financial transparency,” media reports quoted Sandeep Jhunjhunwala, tax partner at Nangia Andersen LLP as saying.
“Sellers will now be required to ensure timely compliance with TCS provisions, while buyers of notified luxury goods may experience enhanced KYC requirements and documentation at the time of purchase. Although the luxury goods sector may undergo some transitional challenges, this measure is expected to promote formalisation and improved regulatory oversight over time,” said Jhunjhunwala.
