The Income Tax Department has implemented a new rule effective from April 22, 2025, mandating a 1% Tax Collected at Source (TCS) on the sale of luxury goods priced above ₹10 lakh. This measure, introduced under Section 206C of the Income Tax Act, aims to bring greater transparency in high-end retail transactions and promote tax compliance.
Key Highlights of the New Rule
- Effective Date: April 22, 2025
- Legislation: Section 206C of the Income Tax Act
- Announced In: Finance Act, Union Budget
- Objective: To monitor high-value spending and ensure a better audit trail in the luxury goods segment.
Goods Covered Under 1% TCS Rule
Sellers must collect 1% TCS on these luxury items if the sale price exceeds ₹10 lakh,
- Luxury wristwatches
- High-end handbags and sunglasses
- Designer footwear and premium sportswear
- Paintings, sculptures, antiques
- Collectibles like rare coins and stamps
- Private yachts and helicopters
- Advanced home theatre systems
- Horses for racing or polo
Example Calculation
- If you purchase luxury goods worth ₹30 lakh:
- TCS to be collected = 1% of ₹30 lakh = ₹30,000
- The seller collects and deposits this amount against your PAN
Claiming TCS While Filing ITR
- TCS appears in Form 26AS (linked to PAN).
- This amount can be claimed as a tax credit while filing your Income Tax Return (ITR).
- If your final tax liability is less than the collected TCS, you are eligible for a refund—similar to how TDS on salary works.
Compliance Expectation
Sellers must,
- Collect 1% TCS on applicable sales.
- Deposit it on time under the buyer’s PAN.
- Maintain detailed records for audit.
Buyers should
- Ensure accurate KYC details (PAN).
- Keep purchase invoices.
- Claim TCS while filing ITR.
Summary/Static | Details |
Why in the news? | 1% TCS on Luxury Goods Over ₹10 Lakh (Effective April 22, 2025) |
Rule | 1% TCS on luxury goods above ₹10 lakh |
Applicable Law | Section 206C, Income Tax Act |
Announced In | Finance Act, Union Budget |
Objective | Boost audit trail & tax compliance |
Covered Items | Watches, handbags, footwear, yachts, etc. |
Minimum Price | Threshold ₹10 lakh |
Tax Rate | 1% of sale value |
Collected By | Seller |