TCS: Now 1% TCS will have to be paid on luxury items worth more than Rs 10 lakh, government issued notification..

Luxury goods like handbags, wristwatches, shoes, and sportswear worth more than Rs 10 lakh will now attract one percent tax collected at source (TCS). The Income Tax Department has issued a notification regarding levying TCS at the rate of 1 percent on the sale of luxury goods from April 22, 2025. This will apply to those things where the sale value will be more than Rs 10 lakh. The imposition of TCS on luxury goods under the Finance Act, 2024 was announced in the July 2024 budget.

The responsibility of paying TCS lies with the seller, which he collects from the customers. This tax will apply to notified goods such as wristwatches, art objects such as paintings, sculptures, and antiques, collectibles such as coins and stamps, yachts, helicopters, luxury handbags, sunglasses, shoes, high-end sports apparel and equipment, home theater systems and racing or polo horses, etc.

According to Sandeep Jhunjhunwala, tax partner, Nangia Andersen LLP, this notification has been issued as part of the government's intention to increase monitoring of high-value items and strengthen the audit trail in the luxury goods segment. This is indicative of the broader policy objective of expanding the tax base and promoting greater financial transparency.

He said that sellers will now have to ensure timely compliance with TCS provisions. At the same time, buyers of notified luxury goods will have to face more KYC requirements and documentation while purchasing such items.

Jhunjhunwala said, "Although this decision may pose some challenges to the luxury goods sector, this decision is expected to promote better regulatory monitoring."

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