The Central Board of Direct Taxes (CBDT) has implemented 1 percent Tax Collection at Source (TCS) on luxury items such as wristwatches, handbags, sunglasses, shoes and sportswear worth more than Rs 10 lakh with immediate effect. A notification has been issued regarding the new rules. Under which art related items like paintings and sculptures, yachts, home theater systems and horses for racing or polo are also part of this list.

The CBDT notification states that tax on this list of luxury items has been implemented from April 22, 2025.

TCS announced luxury items in the budget

Let us tell you that TCS on luxury items was announced in the July 2024 budget. The Budget 2024 Memorandum states that TCS on luxury items will be applicable from January 1, 2025. An amendment was introduced in the Union Budget 2024-25, under which sellers of motor vehicles or any other goods valued at Rs 10 lakh or more or as specified by the central government are expected to collect 1 percent TCS from the buyer. However, a notification to implement this decision was not issued.

Sandeep Jhunjhunwala, tax partner at Nangia Andersen LLP, said the notification brings to the fore the government's intent to enhance monitoring of high-value expenditure and strengthen the audit trail in the luxury goods segment.

He further added, "This reflects the policy objective of expanding the tax base and promoting greater financial transparency. Sellers will now have to ensure timely compliance of TCS provisions, while buyers of notified luxury goods may need increased KYC requirements and documentation at the time of purchase." Alok Agrawal, partner, of Deloitte India, said, "TCS at the rate of 1 percent will be applicable on the entire value of notified goods if the sale value exceeds Rs 10 lakh. The objective behind this move is to widen and deepen the scope of the tax given the increasing expenditure on luxury goods. This may initially lead to more inquiries from HNIs who are buying these items and are not filing tax returns or not reporting high amounts of taxable income in their tax returns."

Amit Maheshwari, tax partner, AKM Global, said, "By bringing high-value goods such as wristwatches, art pieces, antiques, yachts and collectibles (above Rs 10 lakh) into the TCS frame at the rate of 1 per cent, the government is expanding the scope of the tax beyond just motor vehicles."

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