Luxury goods above ₹10 Lakh to attract 1% Tax Collected at Source

The seller collects tax at source from the buyer at a specified rate. The buyer can adjust the TCS against their total tax liability while filing the income tax return (ITR)

New Delhi: Luxury items priced over ₹10 lakh will incur a 1% Tax Collected at Source (TCS) from April 22, which will be collected by the seller on behalf of the government.

The government has expanded the provision of TCS from motor vehicles (above ₹10 lakh) to other luxurious items like antiques, painting, sculpture, collectibles (coin and stamp), yacht, rowing boat, canoe, helicopter, sunglasses, handbag, purse, shoes (Representative photo)

Aiming to widen the tax net and detect tax evaders, the government has expanded the provision of TCS from motor vehicles (above ₹10 lakh) to other luxurious items like antiques, paintings, sculptures, collectibles (coin and stamp), yachts, rowing boats, canoes, helicopters, sunglasses, handbags, purses, shoes, sportswear, golf kits, ski-wear, home theatre systems, horses for racing in race clubs and for polo, according to a notification issued by the finance ministry.

TCS was introduced in the late 1980s as an anti-evasion measure to track income from businesses like liquor and forest contracts. Under this system, the seller collects tax at source from the buyer at a specified rate. The buyer can adjust the TCS against their total tax liability while filing the income tax return (ITR).

This move is a strategic step towards enhancing tax transparency and tracking high-value consumption trends, Munjal Almoula, head of tax at consultancy firm BDO India, said. “Effective April 22, 2025, the levy applies to notified products exceeding ₹10 lakh in value with tax applicable on the full transaction amount in excess of INR 10 lakh. This move aligns with global trends in tax surveillance and tax transparency,” Almoula added.

Amit Maheshwari, tax partner at AKM Global, said, “This will enhance the traceability of luxury spending.”

“The intention of introducing TCS on Luxury goods is to widen the tax base as well as compare or evaluate taxes paid by respective buyers is commensurate. Having said that, the luxury boutiques will have onerous compliance burden of convincing the buyers to shell out tax in addition to value of goods, collect relevant tax data from buyers and file periodic returns as well as ensure timely deposit of TCS. Revenue will have to monitor the TCS collected vis-à-vis extra tax collection under this new regime and ensure that there is fair proportionality / balance impact on business of luxury boutiques and compliance burden,” tax partner at EY India Samir Kanabar said.