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High-value wrist watches, art pieces, collectibles, and home theatres are some of the items that will attract 1% TCS if the value of each is above Rs 10 lakh.
The seller will be responsible for collecting this 1% TCS on luxury goods from the buyer at the time of receiving payment.
In a move aimed at tightening the tax net around high-value purchases, the Central Board of Direct Taxes (CBDT) has notified a 1% Tax Collected at Source (TCS) on a range of luxury goods sold for over Rs 10 lakh. The new rule, which is in line with the Budget 2025 announcements, comes into effect from April 22, 2025, and applies to sellers receiving payments above the specified threshold for these items.
The CBDT has released two separate notifications — one related to the nature of luxury goods and the other with the tax rate and the threshold amount above which the TCS will be applicable.
According to the CBDT notifications, the following goods will attract 1 per cent TCS if the sale value exceeds Rs 10 lakh:
- Wrist watches
- Art pieces (including antiques, paintings, sculptures)
- Collectibles (such as coins and stamps)
- Luxury vehicles like yachts, rowing boats, canoes, and helicopters
- Sunglasses
- Luxury bags (handbags, purses)
- Shoes
- Sportswear and sports equipment (such as golf kits, ski-wear)
- Home theatre systems
- Horses used for horse racing and polo
The seller will be responsible for collecting this 1% TCS from the buyer at the time of receiving payment.
The TCS provision for luxury goods was introduced via Finance Act, 2024, as part of the Budget presented in July, 2024.
Nangia Andersen LLP Tax Partner Sandeep Jhunjhunwala, said 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.
“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,” Jhunjhunwala added.
What is TCS?
Tax Collected at Source (TCS) is a type of tax where the seller collects tax from the buyer at the time of sale of certain goods or services, and remits it to the government. This mechanism ensures early collection of tax on high-value transactions and helps track spending patterns for better tax compliance.
For example, if someone purchases a luxury watch worth Rs 15 lakh, the seller will have to collect Rs 15,000 (1% of Rs 15 lakh) as TCS and deposit it with the income tax department.
How To Claim TCS?
The buyer can later claim credit for this amount while filing their income tax return, if the final tax liability is lower than the total TCS collected. It works like TDS on salary, where the tax deducted is adjusted during ITR filing.
