 "Watches, art, bags, sportswear over Rs 10 lakh? Say hello to 1% TCS")
Luxury shoppers, take note: If you're eyeing that limited-edition wristwatch, high-end handbag, or luxury yacht, be prepared to pay a little extra—not as a cost, but as a tax trail. Starting April 22, 2025, the Income Tax Department will levy a 1% Tax Collected at Source (TCS) on high-value luxury goods priced above Rs 10 lakh.
"The much-anticipated notification on TCS on luxury goods brings clarity on scope and thresholds. Effective April 22, 2025, the levy applies to notified products exceeding ₹10 lakh in value with tax applicable on the full transaction amount in excess of Rs 10 lakh.. This move is a strategic step towards enhancing tax transparency and tracking high-value consumption trends, a move that aligns with global trends in tax surveillance and tax transparency," said Munjal Almoula, Head of Tax, BDO India.
This move is part of the government's larger effort to trace big-ticket spending, widen the tax base, and bring greater transparency to luxury purchases.
What’s Covered Under the New TCS Rule?
According to the notification issued on April 22, 2025, the following luxury items will now attract 1% TCS if they are sold for ₹10 lakh or more:
- Luxury handbags
- Wrist watches
- Footwear and high-end sportswear
- Designer sunglasses
- Art pieces (paintings, sculptures, antiques)
- Collectibles (coins, stamps)
- Yachts, helicopters
- Race or polo horses
- Home theatre systems
Already, motor vehicles priced above Rs 10 lakh have been under the TCS net since the beginning of 2025.
How Does TCS Work?
- Collected by the seller at the time of purchase
- Charged at 1% of the sale price (on items above Rs 10 lakh)
- Adjusted against your total income tax at the time of filing returns
- Requires PAN submission at the time of transaction
Example: Buying a luxury handbag worth Rs 12 lakh? The seller will collect Rs 12,000 (1%) as TCS, which will be credited against your total tax liability when you file your income tax return.
Why this matters
While TCS doesn’t increase your tax burden, it helps the government keep track of high-value discretionary purchases. The goal is to create a digital footprint of expensive buys and encourage people to declare their real financial status.
"The notification operationalises the government’s intent to monitor high-value discretionary spending and improve audit trails in the luxury sector,” said Sandeep Jhunjhunwala, Tax Partner at Nangia Andersen LLP.
What This Means for Buyers
- Be ready for more KYC requirements at luxury outlets
- Ensure your PAN details are updated
- TCS will be visible in your Form 26AS (tax credit statement)
- Keep purchase receipts for tax filing reference
This rule doesn’t change your actual tax liability—it just brings luxury purchases under the tax department’s radar. It’s part of the government’s effort to formalise the economy and ensure financial transparency, especially in sectors where cash transactions and unreported income have been common.
"It’s a light-touch compliance measure with long-term benefits for tax enforcement and the formal economy,” noted Amit Maheshwari, Tax Partner at AKM Global.