Introduction: Understanding the 1% TCS on Luxury Goods Above ₹10 Lakh
Luxury shopping in India just got a little more expensive—but not in the way you think. Starting April 22, 2025, the Central Board of Direct Taxes (CBDT) has rolled out a new tax rule that mandates 1% TCS on luxury goods above ₹10 lakh.
If you’re planning to buy a high-end watch, designer handbag, or even a yacht (lucky you!), this new TCS for high-value items will apply to you. Let’s break it down.
What is the 1% TCS on Luxury Goods Above ₹10 Lakh?
Tax Collected at Source (TCS) is a form of advance tax that is collected by the seller from the buyer at the time of sale. This collected tax is then deposited with the government. It’s applicable on specific goods such as luxury items priced above ₹10 lakh, like high-end watches and art pieces.
With the luxury goods tax rule in India being amended by CBDT, the scope of TCS now extends beyond motor vehicles to cover several luxury items.
CBDT TCS Rule 2025 and Its Impact on Luxury Goods
The CBDT TCS rule 2025 comes into effect to curb tax evasion, ensuring that buyers of luxury goods above ₹10 lakh follow compliance. The rule mandates a 1% TCS on luxury items. This significant move is aimed at tracking high-value transactions, ensuring fair tax collection, and improving transparency in the luxury goods sector.
Goods Affected by the New TCS Rule on Luxury Goods
The luxury goods tax rule in India now applies to items like:
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Wristwatches
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Art pieces (antiques, paintings, sculptures)
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Collectibles (coins, stamps)
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Yachts, helicopters, and more
For instance, if you are purchasing a Rolex watch for ₹15 lakh, the TCS for high-value items will apply at 1% of the total price, i.e., ₹15,000.
TCS on Luxury Goods Above ₹10 Lakh: Key Changes
The new 1% TCS on luxury goods above ₹10 lakh is a flat rate on any item exceeding the threshold. This TCS is collected by the seller at the time of purchase and is reported to the government.
The changes are in response to concerns about large-scale tax evasion and non-compliance in the luxury goods sector. This new rule will affect individuals purchasing goods like designer bags, sports gear, and even yachts.
How to Claim TCS for Luxury Goods Purchased
For buyers, you can claim the TCS amount collected under the new rule as part of your tax filing. Ensure you share your PAN during the purchase so the TCS amount is linked to your Form 26AS for tax credit. This will help you get a refund if your total tax liability is less than the TCS paid.
Practical Example: 1% TCS on High-Value Purchases
If you buy a painting worth ₹50 lakh, TCS for high-value items would be ₹50,000. This amount is collected by the seller and deposited under your PAN details. You can claim it while filing your Income Tax Returns.
What Sellers Need to Do Under the CBDT TCS Rule 2025
Sellers of luxury goods are required to:
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Collect 1% TCS at the time of sale.
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Deposit the collected tax with the government.
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File quarterly returns via Form 27EQ and issue a TCS certificate to the buyer.
Failure to comply with the luxury goods tax rule in India may result in penalties and interest.
Impact of TCS on Luxury Goods and Buyers
The impact of TCS on luxury goods will be felt by high-net-worth individuals, who may now need to factor in an additional 1% tax on their luxury purchases. This change is intended to increase tax compliance and curb tax evasion in high-value transactions.
Conclusion: What You Need to Know About the 1% TCS on Luxury Goods
To wrap up, the introduction of 1% TCS on luxury goods above ₹10 lakh is a pivotal shift in India’s tax landscape. This change, effective from April 2025, will directly affect luxury buyers and sellers, making high-end shopping just a little more expensive. Be sure to understand how to claim the tax credit and ensure compliance when purchasing or selling luxury items.
FAQs
1. What is the purpose of the 1% TCS on luxury goods?
The purpose is to track high-value purchases and curb tax evasion in the luxury goods sector.
2. Can I avoid the TCS by purchasing multiple smaller items?
No, the rule applies per item. If any individual item exceeds ₹10 lakh, TCS will be applicable.
