From watches to horses: Now, 1% TCS on luxury goods over ₹10 lakh

Earlier, TCS under Section 206C (1F) was applicable primarily to the sale of motor vehicles above ₹10 lakh

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The Central Board of Direct Taxes (CBDT), operating under the finance ministry, has significantly broadened the ambit of tax collected at source (TCS) under Section 206C of the Income Tax Act, extending it to a wide range of high-end luxury goods.

 

The decision, which comes into effect from April 22, is aimed at curbing tax evasion and improving the traceability of high-value discretionary spending, while also offering the government a potential additional stream of revenue at a time of growing global economic uncertainty.

 

Under the revised rules, sellers will be required to collect TCS at a rate of 1 per cent on the sale of specified luxury items where the value exceeds ₹10 lakh. The list of goods includes wrist watches, designer sunglasses, handbags, artworks such as paintings, collectibles like coins and stamps, yachts, helicopters, golf kits, home theatre systems, and horses intended for racing or polo. 

 

Previously, TCS under Section 206C (1F) applied primarily to the sale of motor vehicles priced above ₹10 lakh. However, with the Finance Act 2024, the provision has been expanded, giving the government authority to notify additional categories of luxury goods that fall within this threshold.

 

These changes have been codified under the Income-tax (Eleventh Amendment) Rules, 2025. To help compliance and reporting, the updated Form 27EQ now features dedicated codes – ranging from MA to MJ – for each new category.

 

Tax specialists say the move reflects a broader policy push to use TCS as a tool to monitor luxury consumption and bring more such buyers into the tax net.

 

Samir Kanabar, tax partner at EY India, said the new rule aims to widen the tax base and assess whether buyers’ declared income aligns with their spending patterns. “That said, luxury boutiques now face a significant compliance burden of convincing buyers to shell out tax in addition to the value of goods, collect relevant tax data from buyers, and file periodic returns as well as ensure timely deposit of TCS,” he noted.

 

Sandeep Jhunjhunwala, tax partner at Nangia Andersen LLP, said the notification puts into effect the government’s wider goal of increasing scrutiny on high-end purchases and tightening regulatory oversight.  “Although the luxury goods sector may undergo some transitional challenges, this measure is expected to promote formalisation and improved regulatory oversight over time,” he added.