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Time of India
24-04-2025
- Business
- Time of India
New 1% TCS on luxury goods: Full list, limits & FAQs - what the new rule means for you
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. Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Google Brain Co-Founder Andrew Ng, Recommends: Read These 5 Books And Turn Your Life Around Blinkist: Andrew Ng's Reading List Undo 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. Stay informed with the latest business news, updates on bank holidays and public holidays . Master Value & Valuation with ET! Learn to invest smartly & decode financials. Limited seats at 33% off – Enroll now!
Time of India
23-04-2025
- Business
- Time of India
Catch the nouveau riche! Income tax dept casts a new dragnet
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads India is spawning a new rich class, especially in its small towns, which splurges on personal luxury goods with abandon but often escapes the income tax net. But not anymore. The July 2024 Budget had proposed to bring the expenses made on luxury goods by the rich under the ambit of TCS (Tax collected at source) if cost of luxury goods is more than Rs 10 lakh. This tax is now taking effect from April 22, 2025. From wrist watches to art pieces to yachts to handbags, purses and shoes to golf kits, a number of luxury goods will now attract with this new TCS, the government is not intending to bulk up its direct tax revenues. Once the TCS is collected from the buyer, it is the seller's duty to deposit the same against the buyer's PAN. Once the tax is deposited against the buyer's PAN, the buyer can use it to claim a tax credit and pay a lower tax in the ITR filing. The idea is to throw a light on luxury goods purchases so the rich can't escape the tax net or underpay their income government's move comes amid a rising number of the rich in India, especially in small towns, who splurge on luxury goods but might be under-reporting their luxury items over 10 lakh rupees are purchased in cash, it results in loss of tax revenue to the government as cash transactions go untraced. "The TCS will help the government in bringing under purview such individuals who report lower income in their tax returns and buy luxury items, questioning the credibility of income reported by such individuals. It aims to curb unaccounted cash transactions, improve transparency and tax compliance," Nainit Digesh Savla, owner of CA firm ND Savla and Associates, has told India's economy expands, disposable incomes rise and the size of the affluent population grows, consumers are increasingly gravitating toward premium products and luxury brands. This trend, which accelerated during the pandemic, shows no signs of slowing down. From luxury cars to high-end beauty products, India's affluent class is willing to spend on premium items that offer quality and exclusivity. This trend is also catching up in small towns where people are getting richer and are more willing to splurge on minted a new billionaire every five days in the last one year and took the total count of US dollar billionaires to cross the triple-century mark for the first time, as per the 2024 Hurun India Rich List which showed that India now has 334 billionaires by adding 75 compared to the last India report found a total of 1,539 individuals in India with a wealth of at least Rs 1,000 crore. If Rs 5,000 crore is taken as the threshold, the rich list has 534 HNIs. "Assuming that for every one Hurun rich lister we have found, we have probably missed two, India today likely has 5,000 individuals worth Rs 1,000 crore," Anas Rahman Junaid, Founder and Chief Researcher, Hurun India, said. The cumulative wealth of India's richest rose 46%, while average wealth has increased by 25%.Back in 2015, a CII-IMRB study had said that Growth in the country's luxury market would be driven by those living in tier 2 and 3 cities, as the aspirational class in non-metros acquires higher spending capacity,The study was based on responses from high net worth individuals (HNIs) in non-metropolitan cities, men and women in the age group of 20-55 years, with an annual household income of over Rs 1 crore about luxury product categories owned by them and how they accessed and engaged with luxury products/brands in a decade later, India's small-town rich are indeed driving luxury goods sales. Since they are a rising class, many of them can under-report their income and escape the tax scrutiny by buying luxury goods with cash which is still the king in non-metro locations.A recent report by Tata Cliq Luxury has revealed that smaller Indian cities are driving significant growth in luxury shopping, thanks to the increased access provided by online platforms. Towns like Botad in Gujarat and Asansol in West Bengal are seeing a surge in purchases of high-end footwear, watches, clothing, and fresh twist to India's wealth story, people in small towns are increasingly signing up for wealth management services such as portfolio management (PMS), alternative investment funds (AIFs), and wealth advisory, ET has reported recently. Startups offering these services say around 30% of their new users now come from beyond the top 18 state capitals. Founders of new-age wealth-tech startups Dezerv, Centricity and Ionic Wealth, among others, have told ET that multiple factors – including technological capabilities that have reduced the cost of servicing a single client, overall financial growth of the country, and improved access to information – are driving wealth advisory into smaller income-tax department is all set to catch this rising number of nouveau riche in its dragnet with the TCS on purchase of luxury goods.
