From April 22, 2025, buying luxury goods worth over ₹10 lakh will come with a 1% Tax Collected at Source (TCS). This update follows the Finance Act, 2024, with the Central Board of Direct Taxes (CBDT) issuing fresh notifications to explain how it will work. The new rule applies to high-end items like expensive wristwatches, designer handbags, yachts, and luxury sports gear.
The tax falls under Section 206C of the Income Tax Act, putting the onus on sellers to collect it. Sellers must deposit the collected TCS against the buyer’s PAN. Later, buyers can claim this amount as a tax credit when filing their Income Tax Return (ITR).
The new TCS rule on luxury goods is meant to improve financial tracking and keep a closer check on expensive purchases. It’s part of the government’s plan to widen the tax base and increase transparency. As per CBDT’s guidelines, sellers must follow the rules strictly, while buyers may have to share more documents and complete KYC formalities when buying these items. After the tax is collected and deposited using the buyer’s PAN, sellers must issue a TCS certificate for the buyer’s records.
This 1% tax applies to many luxury items—like paintings, sculptures, rare coins, and stamps. It also covers yachts, helicopters, designer handbags, sunglasses, and premium sportswear. For example, if someone buys a luxury item worth ₹30 lakh, they will pay ₹30,000 as TCS, just like how TCS is already collected on cars priced above ₹10 lakh.
Under the new rule, sellers must collect Tax Collected at Source (TCS) on several luxury goods. These include wristwatches, antiques, paintings, sculptures, and collectibles like coins and stamps. High-value transport items such as yachts, canoes, rowing boats, and helicopters also fall under this category.
Additionally, luxury accessories like sunglasses, handbags, purses, and designer shoes are included. The tax also applies to premium sportswear and equipment, such as golf kits and ski wear, as well as home theatre systems. Even horses used for horse racing or polo are covered under the TCS provision.
Tax experts, including Sandeep Jhunjhunwala of Nangia Andersen LLP, see the move as a crucial step in monitoring discretionary spending and strengthening the audit trail for luxury goods. Jhunjhunwala noted that sellers must “ensure timely compliance with TCS provisions, while buyers… may experience enhanced KYC requirements and documentation at the time of purchase.” Though the sector may face some initial challenges, these changes are “expected to promote formalisation and improved regulatory oversight over time.”
Munjal Almoula, Head of Tax at BDO India, stated: “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 lakhs. 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.”
The TCS mechanism allows buyers to claim credit while filing ITRs, similar to TDS on salaries. If the collected tax exceeds the buyer’s liability, a refund can be claimed. This policy aims to formalise the luxury market and improve oversight, echoing tax norms on high-value vehicle purchases.