New Delhi, April 23 The Central Board of Direct Taxes has notified the new rules to bring into immediate effect the 1 per cent tax collected at source (TCS) on luxury goods that cost over Rs 10 lakh, such as wrist watches, handbags, sunglasses, shoes, and sportswear.
Art objects including paintings and sculptures, yachts, home theatre systems as well as horses intended for racing or polo also figure on the list.
The CBDT notification states that the tax on this list of luxury goods will be collected with effect from April 22, 2025.
The TCS on luxury goods was announced in the July 2024 Budget. The Budget 2024 memorandum stated that the TCS on luxury goods will be applicable from January 1, 2025.
The Union Budget 2024-25 had brought in an amendment under which sellers of motor vehicles priced at Rs 10 lakh or more any other goods specified by the Central government, would be expected to collect 1 per cent TCS from the buyer. However, the notification to implement the move had not been issued.
Sandeep Jhunjhunwala, Tax Partner at Nangia Andersen LLP, said that the 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. 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."
Alok Agrawal, Partner, Deloitte India, said: "TCS at the rate of 1 per cent will apply on the entire value of the notified items so long as the sale consideration exceeds Rs 10 lakh. 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 not reporting high amounts of taxable income on their tax returns."
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