Handbags, wrist watches, footwear and sportswear priced above Rs.10 lakh will now attract a 1% tax collected at source (TCS). In a notification released on 22.04.2025 the Income tax department detailed categories which will now be subjected to this TCS.
Although TCS doesn’t result in any additional revenue, the move is aimed at improving the income tax department’s ability to track high-value purchases, since PAN details are mandatory at the time of purchase. The TCS paid can be adjusted against the buyer’s final tax liability when filing returns.
List of luxury items above Rs.10 lakh under the 1% TCS.
Accessories: Wrist watches, sunglasses, shoes and handbags
Art pieces: Sculptures, antiques, paintings
Collectables: Coin, stamp
Transportation: Rowing boat, canoe, helicopter, yachts
Sports gear: Golf kits, ski-wear
Home theatre system
Horses for racing and polo games
The provision for luxury goods and motor vehicles costing more than Rs.10 lakh was introduced through Finance Act 2024, as part of the Union Budget presented in July last year.
Tax experts believe the step will improve transparency and tighten the loop around discretionary spending.
Sandeep Jhunjhunwala, tax partner at Nangia Andersen LLP, told PTI that the notification strengthens the government’s aim to closely monitor high-value discretionary spending and improve the audit trail within the luxury goods segment.
“Sellers will now be required to ensure timely compliance with TCS provisions, while buyers of notified luxury goods may experience enhanced KYC requirements and documentation at the time of purchase.”
He further added, although the sector may undergo some traditional challenges, this measure is expected to promote formalisation and improved regulatory oversight over time.
“This will enhance the traceability of luxury spending,” said Amit Maheshwari, tax partner at AKM Global. Additionally, he said, by bringing high-value items into the TCS framework with a 1% rate, the government is widening the tax net beyond just motor vechicles.
Source: The Times of India
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