New 1% TCS on luxury goods: Full list, limits & FAQs - what the new rule means for you

Time of India

24-04-2025

AI generated image
NEW DELHI: The Central government has introduced changes to the
Income Tax
Act, 1961, expanding the scope of the
Tax Collected at Source
(
TCS
) on luxury goods. Starting April 22, 2025, TCS will be applicable to 'specified range' of luxury goods valued over ten lakh rupees, including items like wristwatches, art pieces, yachts, and more.
Below are comprehensive FAQs on the new provisions, along with the list of luxury goods that will be subject to TCS:
What changes were brought in section 206C(1F) of the Income Tax Act, 1961 through Finance (No. 2) Act, 2024?
Earlier, Section 206C(1F) provided for collection of TCS on the sale of motor vehicles of value exceeding Rs 10 lakh.
Through the Finance (No. 2) Act, 2024, Section 206C(1F) was amended to include a wider range of luxury goods.
TCS will now be levied on any goods exceeding Rs 10 ten lakh, as notified by the Central Government in the Official Gazette.
Which are the luxury goods of value exceeding Rs 10 lakh on which TCS will be levied?
According to
CBDT Notification
No. 36/2025 dated April 22, 2025, the following goods are now included for TCS collection:
S. No.
Nature of goods
1
Any wristwatch
2
Any art piece such as antiques, painting, sculpture
3
Any collectibles such as coin, stamp
4
Any yacht, rowing boats, canoes, helicopters
5
Any pair of sunglasses
6
Any bag such as handbag, purse
7
Any pair of shoes
8
Any sportswear and equipment such as golf kit, ski-wear
9
Any home theatre system
10
Any horse for horse racing in race clubs and horse for polo
Will TCS be levied on the sale of a single item of the notified goods exceeding Rs 10 lakh?
Yes, TCS will be levied on the sale of a single item of any of the goods listed above if the value exceeds Rs 10 lakh.
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When will the new provisions become effective?
The new provisions will be effective from April 22, 2025, as per the notification published by the Central Board of Direct Taxes (CBDT). This change aligns with the Finance Minister's announcement in the July 2024 Budget regarding the imposition of
TCS on luxury goods
.
What do the changes mean for you?
Chartered Accountant Nainit Digesh Savla, owner of N D Savla and Associates, told TOI, "The seller will collect TCS at the rate of 1% of sale consideration at the time of receipt of such consideration, only when the value exceeds ten lakh rupees."
He further clarified that, "TCS will be collected on the entire amount of consideration once it exceeds the given threshold. However, it is pertinent to note that this section would not be applicable if the value of individual item does not exceed the threshold of ten lakh rupees, even if the total transaction value is higher than the said limit."
Experts believe that the introduction of TCS on luxury goods will aid in ensuring greater transparency in high-value transactions and curb tax evasion.
Janhavi Pandit, a Mumbai-based practicing Chartered Accountant, highlighted an important aspect of the compliance process: "If a taxpayer is buying such luxury goods, with the value per item exceeding Rs 10 lakh, he ought to be a high-income earner. Has he disclosed that level of high income in his tax return, or is there a mismatch? The TCS compliance will help the department to pinpoint and scrutinize those specific cases.
"
"If a taxpayer is buying such luxury goods, value per item exceeding 10 lakh, he ought to be a high income earner. Has he disclosed that level of high income in tax return or there is a mismatch? The TCS compliance will help the department to pin point and scrutinize those specific cases." said Pandit.
Mihir Tanna, Associate Director at S.K Patodia LLP, told TOI that the TCS scope has been widened to curb cash use, unaccounted money, and tax high-value transactions.
"The scope of TCS is getting widened to reduce the quantum of cash transactions and for curbing the flow of unaccounted money in the trading system and to bring high-value transactions within the tax net. In 2016, the purchase of motor cars was added; in 2017, the purchase of jewellery was removed; in 2020, remittance under LRS, overseas tour program package, and purchase of goods were added; and recently in 2025, TCS on goods is removed.
" Mihir Tanna said.
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