Now, you will have to pay 1% TCS (tax collected at source) on the purchase of luxury goods like handbags, wrist watches, footwear, high-end sportswear and art objects costing more than Rs 10 lakh.
The Income Tax Department has issued a notification stating that 1% TCS will be imposed on the sale of certain luxury goods priced above Rs 10 lakh. This is effective from April 22, 2025.
The government introduced the TCS provision for luxury goods via Finance Act, 2024, as part of the Union Budget presented last year in July.
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As regard the operationalisation of the new rules, sellers will have to deduct TDS on sale of the notified goods such as wrist watch, art objects such as paintings, sculptures, and antiques, collectible items including coins and stamps, yachts, helicopters, luxury handbags, sunglasses, footwear, high-end sportswear and equipment, home theatre systems, and horses intended for racing or polo.
Alok Agrawal, Partner, Deloitte India, says that on some of the notified items, 10 lacs is a high threshold and may not get triggered in a very large number of transactions/ individuals.
However, as the intention behind this move is to widen and deepen the tax net in view of increasing expenditure on luxury goods, this may initially trigger more queries to those HNIs who are purchasing these items and are not filing tax returns/ or reporting high amounts of taxable income on their tax returns, Agrawal added.
“This will be effective immediately on notification date of 22nd April (while the new provision was enacted through the 2024 Budget w.e.f January 2025, it had indicated that the list of luxury goods would be notified by the Central Government). TCS @ 1% will apply on the entire value (of any of the notified items) so long as the sale consideration exceeds 10 lakh,” he explained.
Munjal Almoula, Head of Tax, BDO India, says that the much-anticipated notification on TCS on luxury goods brings clarity on scope and thresholds.
Effective April 22, 2025, the levy applies to notified products exceeding Rs 10 lakh in value with tax applicable on the full transaction amount in excess of Rs 10 lakh.
This move is a strategic step towards enhancing tax transparency and tracking high-value consumption trends, a move that aligns with global trends in tax surveillance and tax transparency, he noted.
Also read: New Tax Rules: Now pay 1% additional tax on luxury goods worth more than Rs 10 lakh
The government in the February Budget announced many important changes related to tax, especially to make TDS and TCS easy and simple. The purpose of these changes – which became effective from April 1, 2025, was to make tax compliance easier for common taxpayers and traders and eliminate unnecessary complexities.
These changes in TDS and TCS rules in budget were aimed at ensuring taxpayers do not face the hassles of tax deduction and collection like before on sending money abroad, making big purchases or business transactions.