Pay new income tax TCS of 1% on these luxury goods above Rs 10 lakh; CBDT issues notification

Apr 23, 2025

Synopsis
TCS on luxury goods: The income tax department has issued two notifications specifying the list of luxury goods on which tax will be collected at source (TCS) from the buyer. The TCS will be levied on the purchase of luxury goods. Know the new TCS rules on buying luxury goods like Omega watches, Birkin bags, etc.

The Central Board of Direct Taxes (CBDT) has issued a notification specifying the list of luxury goods on which tax collected at source (TCS) will be levied. The CBDT has issued two notifications in this regard. The first notification deals with the nature of luxury goods, while the second one deals with the tax rate and threshold purchase amount above which tax will be levied.

It was a long-awaited notification, as 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. However, there was no notification in this regard to date.

The notifications issued on April 22, 2025, state that the new rules take effect from the date of publication. Hence, from April 22, 22025, the tax will be collected from the mentioned luxury goods.

Ashish Karundia, Practising Chartered Accountant says, "As the CBDT has issued notification on April 22, 2025, the TCS on luxury goods will be levied on specified goods sold on or after this date, at the time of receipt of consideration."

"As the notification is effective from April 22, 2025, it is likely that there will be no TCS applicable on the buying of specified luxury goods between January 1, 2025 and April 21, 2025. However, it will be helpful for buyers and sellers if CBDT can clarify the contrary for TCS on luxury goods," says Abhishek Soni, CEO, Tax2win.in.

Luxury goods on which TCS will be levied

Following is the list of luxury goods on which tax will be collected by the seller as per the notification:

Any wrist watch

Any art piece, such as antiques, paintings and sculptures

Any collectibles such as coins, stamp

Any yacht, rowing boat, canoe, helicopter

Any pair of sunglasses

Any bag such as handbag, purse

Any pair of shoes

Any sportswear and equipment such as golf kit, ski wear

Any home theatre system

Any horse for horse racing in race clubs and a horse for polo

The TCS on the above-mentioned luxury goods items will be levied if the amount paid exceeds the specified amount. The tax will be levied under Section 206C of the Income Tax Act.

Threshold over which TCS will be levied on luxury goods

It is important to note that TCS will be levied if the amount spent on buying the goods exceeds Rs 10 lakh. Hence, if you buy a wristwatch, say, an Omega, which costs more than Rs 10 lakh, then the seller will collect tax from you on the purchase of the wristwatch.

Similarly, tax will be collected by the seller if you buy a home theatre system that costs more than Rs 10 lakh.

Currently, TCS is levied on the sale of a motor vehicle of whose value exceeds Rs 10 lakh.

Tax rate for TCS on luxury goods

The tax will be collected at a rate of 1% of the sale amount. This means that if you buy any specified luxury goods items that cost, say, Rs 30 lakh, then the seller will collect Rs 30,000 as tax on the sale from the buyer.

TCS can be used to claim tax credit in ITR filing

Once the TCS is collected from the buyer, it is the seller's duty to deposit the same against the buyer’s PAN. Once the tax is deposited against the buyer’s PAN, the buyer can use it to claim a tax credit and pay a lower tax in the ITR filing. It is the same way that an employer deducts TDS from salary and deposits it against the employee’s PAN. In case your net tax liability is less than the TCS amount you can claim a refund in your ITR.

The buyer should collect the TCS certificate from the seller once the tax is deposited against the buyer’s PAN.

What the government said on levying TCS on luxury goods

As per the Budget 2024 memorandum, "It has been seen that there has been an increase in expenditure on luxury goods by high net worth persons. For proper tracking of such expenses and in order to widen and deepen the tax net, it is proposed to amend sub-section (1F) of section 206C to also levy TCS on any other goods of value exceeding ten lakh rupees, as may be notified by the Central Government in this behalf. Such goods would be in the nature of luxury goods."

Current applicability of TCS

Prior to notification on TCS on luxury goods, the TCS is applicable on buying a motor vehicle of more than Rs 10 lakh, TCS on foreign travel and foreign remittances and overseas tour packages.

[The Economic Times]