New Delhi: The Income Tax Department has officially notified a 1% Tax Collected at Source (TCS) on the sale of luxury items priced over ₹10 lakh, effective immediately. This move, originally announced in the July 2024 Budget, aims to enhance tax surveillance and plug potential evasion.
Under the new rules, high-value goods like wrist watches, handbags, antiques, paintings, sculptures, sunglasses, home theatre systems, yachts, helicopters, luxury shoes, sportswear, and even race or polo horses will attract the 1% TCS at the time of purchase.
The TCS is to be collected by the seller and matched with the buyer’s tax profile to track big-ticket discretionary spending. The list also includes collectibles like coins, stamps, golf kits, ski-wear, and canoes.
Why it matters:
Tax experts say the move is expected to expand the tax base by tightening scrutiny on luxury spending and enforcing stronger Know Your Customer (KYC) norms for buyers. It also aims to formalize and bring greater transparency to the luxury goods sector.
Sandeep Jhunjhunwala, Tax Partner at Nangia Andersen LLP, noted that while there may be short-term compliance hurdles, this measure reflects the government’s larger intent to monitor high-value purchases and widen the tax net.
The Finance Act, 2024 had already enforced a similar levy on motor vehicles above ₹10 lakh from January 1. This latest notification expands the scope of Section 206C of the Income Tax Act to cover other luxury categories.