1% TCS on luxury goods: FAQs, items covered under it & what experts say

'It could be counterproductive. PAN details were already required for purchases above Rs 2 lakh. TCS may discourage consumers, hurt GST collections from formal retailers, while benefiting grey market'

The Central Board of Direct Taxes (CBDT) has extended the applicability of Tax Collected at Source (TCS) to a wider set of luxury goods priced above Rs 10 lakh and issued a frequently asked questions (FAQ) on Thursday.

 

The new rule, notified Tuesday, comes under the amended Section 206C(1F) of the Income Tax Act, 1961, and mandates a 1 per cent TCS on specified high-value items.

 

Previously, this section applied only to motor vehicles exceeding Rs 10 lakh. Now, following the Finance (No 2) Act, 2024, the list of taxable luxury goods has expanded.

 

Below are the FAQ published by CBDT:

 

 

 

What changes were brought in section 206C(1F) of the Income Tax Act, 1961 through Finance (No. 2) Act, 2024?

 

Earlier, Section 206C(1F) provided for collection of tax at source (TCS) on sale of motor vehicle of value exceeding ten lakh rupees. Vide Finance (No. 2) Act, 2024, section 206C(1F) was amended to provide that TCS will also be levied on any other goods of value exceeding ten lakh rupees, as may be notified by the Central Government in the Official gazette

 

 

Which are the luxury goods of value exceeding Rs 10 lakh on which TCS will be levied?

 

Vide CBDT Notification No. 36/2025 dated April 22 SO 1825(E), the following goods of the value exceeding Rs 10,00,000 have been notified for collection of tax at source as specified in sub-section (1F) of section 206C of the Act -

 

List of Specified Goods (Value exceeding Rs 10 lakh):

 

1. Any wristwatch

 

2. Any art piece, such as antiques, paintings, sculptures

 

3. Any collectibles such as coins, stamps

 

4. Any yacht, rowing boats, canoes, helicopters

 

5. Any pair of sunglasses

 

6. Any bag, such as a handbag, purse

 

7. Any pair of shoes

 

8. Any sportswear and equipment such as golf kit, ski-wear

 

9. Any home theatre system

 

10. Any horse for horse racing in race clubs and horse for polo

 

 

 

When will the new provisions become effective?

 

The new rules are effective from April 22, 2025.

 

 

So what do the experts say?

 

Ankit Jain, Partner, Ved Jain and Associates believes the move may be counterproductive.

 

“The introduction of 1 per cent TCS on luxury goods could be counterproductive. PAN details were already required for purchases above Rs 2 lakh. Adding TCS may discourage consumers and hurt GST collections from formal retailers, while benefiting grey market operators,” said Jain.

 

He added, “In my experience, similar TCS on motor vehicles hasn’t proven effective in detecting tax evasion.”

 

Meanwhile, Kunal Savani, partner, Cyril Amarchand Mangaldas, said, “This marks a significant shift in tax policy aimed at enhancing transparency. Businesses must now update their systems for compliance, ensure proper record-keeping, and timely remittance of TCS. Non-compliance could lead to penalties, interest, and legal consequences under the Income-tax Act.”

 

Alok Agrawal, Partner, Deloitte India said, “On some of the notified items, 10-lakh is a high threshold and may not get triggered in a very large number of transactions/individuals. However, as the intention behind this move is to widen and deepen the tax net in view of increasing expenditure on luxury goods, this may initially trigger more queries to those HNIs who are purchasing these items and are not filing tax returns/or reporting high amounts of taxable income on their tax returns.