If you're a fan of high-end handbags, designer watches, luxury sunglasses, or premium art pieces, your next splurge might cost a bit more than expected. The Central Board of Direct Taxes (CBDT) has officially rolled out a new tax rule that targets luxury purchases worth over ₹10 lakh. Effective immediately, a 1% Tax Collected at Source (TCS) will be levied on a wide range of expensive lifestyle and luxury products.
This move comes as part of the Union Budget announcement in July 2024, which proposed increasing tax oversight on high-value transactions. Now, with CBDT’s notification in effect, let’s break down what this means for luxury consumers and which items are now under the tax scanner.
As per the CBDT’s latest circular, 1% TCS will be applied at the time of purchase of certain luxury goods priced above ₹10 lakh. The following items are included:
👜 Designer Handbags and Purses
🕶️ Luxury Sunglasses
🕰️ Premium Watches
👟 High-End Footwear and Sportswear
🎨 Art Pieces (including paintings, sculptures)
🐎 Racehorses and Polo Horses
🛥️ Yachts
🎥 Home Theater Systems
These luxury goods will now carry a TCS component over and above the existing GST and customs duties, which means your final bill will increase slightly.
The government’s intent is to enhance transparency and curb tax evasion in the high-value transaction segment. Luxury items, often purchased without clear financial trail, are now being brought under a tighter net to ensure compliance.
By introducing a TCS on luxury goods:
💡 The buyer’s PAN will be tracked, creating a traceable purchase trail.
📊 Authorities can monitor high-value spending patterns.
🧾 Purchases above ₹10 lakh will automatically get reported to the Income Tax Department, aiding in profiling high net-worth individuals.
If you’re buying a luxury item worth ₹15 lakh, here’s how your billing could look:
Product Cost: ₹15,00,000
GST (assuming 18%): ₹2,70,000
TCS @1%: ₹15,000
Total Payment: ₹17,85,000
The TCS amount will appear in Form 26AS and can be claimed while filing your Income Tax Return (ITR). So, while it adds upfront cost, it isn't a sunk expense—you can adjust it against your total tax liability.
📌 The TCS is collected by the seller, so you don’t need to make an extra payment separately—it’ll be added to your invoice.
📎 Only applicable on items above ₹10 lakh, so lower-cost items are exempt.
🔁 You can claim this TCS back when you file your ITR—just ensure your PAN is linked with the purchase.
If you frequently purchase high-end goods or plan a big-ticket luxury item in the near future, make sure your PAN is up to date, and track your Form 26AS regularly to ensure all TCS entries are correctly reflected. This helps during ITR filing and prevents unnecessary tax disputes.
This new luxury TCS rule may not drastically affect ultra-high-net-worth buyers, but it sends a strong message: high-value spending will be monitored more closely. If you’re considering a premium lifestyle investment soon—be it a luxury yacht, branded timepiece, or a collector's sculpture—be prepared for a slightly higher invoice.
Stay informed, spend wisely, and keep your tax documents updated. For more updates on taxation, investments, and money matters, keep following our coverage.
