The Central Board of Direct Taxes (CBDT), in its latest notification, has announced that a 1% Tax Collected at Source (TCS) will be levied on the purchase of certain luxury goods valued above ₹10 lakh. These new rules came into effect on April 22, 2025. In this article, we will take a closer look at the scope of the notification, the list of goods covered, the threshold for TCS applicability and what both buyers and sellers need to know about TCS on Luxury Goods.
What’s Changed?
Earlier, luxury goods were not subject to Tax Collected at Source (TCS), but with the new CBDT notification, TCS will now be levied on specified luxury goods valued above ₹10 lakh. Sellers are now required to collect this tax at the time of sale and deposit it against the buyer’s PAN.
The TCS will be reflected in the buyer’s Form 26AS and can be claimed as a credit when filing their Income Tax Return (ITR). If the buyer’s tax liability is lower than the TCS amount, they can claim a refund for the excess amount.
Luxury Goods Subject to Tax Collected at Source (TCS)
As per the latest notification, the following luxury goods will be subject to Tax Collected at Source (TCS) by the seller, in accordance with Section 206C of the Income Tax Act:
- Wristwatches
- Art pieces, including antiques, paintings, and sculptures
- Collectibles such as coins and stamps
- Yachts, rowing boats, canoes, and helicopters
- Sunglasses
- Bags, including handbags and purses
- Shoes
- Sportswear and sports equipment, such as golf kits and ski wear
- Home theatre systems
- Horses used for horse racing or polo
TCS will be applicable on these items if the payment made exceeds the specified threshold amount as defined by the tax regulations.
TCS Threshold on Luxury Goods Purchases
Tax Collected at Source (TCS) will apply to the purchase of luxury goods if the transaction value exceeds ₹10 lakh. For instance, if you purchase a high-end wristwatch such as an Omega priced above ₹10 lakh, the seller is required to collect tax on the sale amount.
The same rule applies to other luxury items like home theatre systems, yachts, and collectables, provided their cost exceeds the ₹10 lakh threshold.
Currently, a similar provision is in place for motor vehicles where TCS is levied if the vehicle’s value exceeds ₹10 lakh.
Applicable TCS Rate for Luxury Goods Purchases
TCS on luxury goods will be charged at the rate of 1% of the total sale amount.
For example, if you purchase a luxury item worth ₹30 lakh, the seller will collect ₹30,000 as tax at the time of sale.
Effective Date of 1% TCS on Luxury Goods
The government has announced in the Union Budget 2024 that TCS on luxury goods would come into effect from January 1, 2025. However, no formal notification had been issued until April 2025.
With the release of the notification on April 22, 2025, the new rules took immediate effect. As a result, from this date onwards (April 22, 2025), 1% TCS on specified luxury goods will be collected by the seller.
Procedural Update: Amendment to Income-tax Rules
To facilitate the implementation of the new TCS provisions on luxury goods, the Central Board of Direct Taxes (CBDT) has notified the Income-tax (Eleventh Amendment) Rules, 2025, amending the Income-tax Rules, 1962.
The amendment updates Form No. 27EQ—used by sellers to file quarterly TCS returns—by adding specific reporting codes for luxury goods now covered under Section 206C(1F).
The official notification is attached here for reference:
Key Takeaway Under TCS for Luxury Goods.
Buyers:
- 1% TCS will be collected on luxury goods valued above ₹10 lakh at the time of payment.
- The TCS will be deposited against the buyer’s Permanent Account Number (PAN).
- This tax will appear in the buyer’s Form 26AS, which can be claimed as a tax credit when filing the Income Tax Return (ITR).
- If the buyer’s tax liability is zero, the excess TCS can be refunded.
Sellers:
- Sellers are responsible for collecting 1% TCS on luxury goods valued above ₹10 lakh at the time of sale.
- The collected TCS must be deposited against the buyer’s PAN.
- Sellers must update TCS details in Form 27EQ and ensure proper reporting in their quarterly returns.
- A TCS certificate must be provided to the buyer, enabling them to claim tax credit during ITR filing.
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FAQs on TCS on Luxury Goods
1. What is TCS, and How Does it Work?
Tax Collection at Source (TCS) is a mechanism through which a specific percentage of the transaction value is deducted and remitted to the government as advance tax. The primary objectives of TCS are:
- Improve tax compliance by capturing transactions at the source
- Widen the tax base by bringing more individuals and entities under the tax net
- Facilitate better tax administration and monitoring of high-value transactions
2. What amendment was made to Section 206C(1F) through the Finance (No. 2) Act, 2024?
Initially, Section 206C(1F) mandated Tax Collected at Source (TCS) only on the sale of motor vehicles exceeding ₹10 lakh in value. The Finance (No. 2) Act, 2024, expanded its scope to include any other goods valued above ₹10 lakh, as notified by the Central Government via official notification.
3. Which luxury goods have been notified for TCS collection if their value exceeds ₹10 lakh?
As per CBDT Notification No. 36/2025 dated April 22, 2025 [SO 1825(E)], the following goods are subject to TCS if their value exceeds ₹10 lakh:
Wristwatches, Art pieces, including antiques, paintings, and sculptures, Collectibles such as coins and stamps, Yachts, rowing boats, canoes, and helicopters, Sunglasses, Bags, including handbags and purses, Shoes, Sportswear and sports equipment, such as golf kits and ski wear, Home theatre systems, Horses used for horse racing or polo
4. Will TCS apply to the sale of a single luxury item exceeding ₹10 lakh in value?
Yes, TCS will be applicable even if a single item from the notified list is sold and its value exceeds ₹10 lakh.
5. When do the new TCS provisions come into effect?
The provisions are effective from April 22, 2025, i.e., the date of publication of the notification.
6. How to Claim Tax Credit for TCS on Luxury Goods in ITR?
When Tax Collected at Source (TCS) is deducted on the purchase of luxury goods, the seller is responsible for depositing the tax amount against the buyer’s Permanent Account Number (PAN). Once deposited, the buyer can claim this TCS as a tax credit while filing their Income Tax Return (ITR).
This process is similar to how an employer deducts Tax Deducted at Source (TDS) from an employee’s salary and deposits it with the income tax department under the employee’s PAN.
- If total tax liability is less than the TCS amount collected, buyer can claim a refund for the excess tax in your ITR.
- To facilitate this, buyers should ensure they collect the TCS certificate from the seller as proof of tax deposited.
About the Author:
Areeb is a Tax Compliance and Digital Marketing expert helping businesses stay legally compliant and digitally strong. Connect with him for practical tax solutions and smart marketing strategies!
