Tax Alert! Watches, Handbags, And Other Luxury Purchases Over Rs 10 Lakh To Face 1 Per Cent TCS Now

The official list includes an array of items such as yachts, helicopters, home theatre systems, sunglasses, luxury fashion items, as well as art objects like paintings, sculptures, and antiques.

The new provision for luxury goods was introduced in the Finance Act, 2024, and was part of the Union Budget presented in July last year.

Source : Freepik

The Income Tax department has expanded the scope of Tax Collected at Source (TCS) to cover more luxury items, with a new notification dated April 22. Effective from January 1, 2025,  1 per cent TCS will now be levied not just on high-end motor vehicles but also on a broad range of premium goods and collectables priced above Rs 10 lakh.

Previously, the 1 per cent TCS provision only applied to vehicles exceeding the Rs 10 lakh threshold. With the latest update, this tax will also apply to high-value handbags, wrist watches, footwear, and sportswear. The official list includes an array of items such as yachts, helicopters, home theatre systems, sunglasses, luxury fashion items, as well as art objects like paintings, sculptures, and antiques. Collectables such as rare coins and stamps, and even horses used in racing or polo, also fall under the scope of this measure, reported PTI.

Tracking High-End Spending for Better Transparency

As per the Income Tax rules, TCS is collected from buyers at the point of sale. While it doesn't generate additional tax revenue, it plays a crucial role in creating an audit trail of high-value transactions. PAN details are required during purchase, allowing tax authorities to track big-ticket spending and improve overall financial transparency.

The new provision for luxury goods was introduced in the Finance Act, 2024, and was part of the Union Budget presented in July last year. The compliance burden rests on the seller, who must collect and remit the TCS to the authorities.

Tax experts see this development as a step toward tighter regulation and better monitoring of discretionary spending in the luxury segment. Munjal Almoula, Head of Tax, BDO India noted, "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 10lakhs. 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."