Centre Imposes 1% Tax on Luxury Goods Above Rs 10 Lakh

The Central Board of Direct Taxes (CBDT) has issued a notification bringing the levy of 1% Tax Collected at Source (TCS) on luxury items above Rs 10 lakh from April 22, 2025. They cover wristwatches, handbags, sunglasses, footwear, sporting attire, artwork like paintings and sculpture, yachts, home theater systems, and horses used for racing or polo.

This step follows the announcement of the July 2024 Budget, when it had sought to introduce TCS on large-value items from January 1, 2025. The Union Budget FY 2024-25 has proposed that dealers of high-value goods, including motor vehicles having a price exceeding Rs 10 lakh, impose 1% TCS. The official order was, however, left pending until now.

Sandeep Jhunjhunwala, Tax Partner at Nangia Andersen LLP, was of the view that the notification reinforces the government's desire to tighten control over discretionary high-value expenditures and strengthen the audit trail in the luxury goods space. He added, "This is a part of a larger policy objective of widening the tax base and enhancing more financial transparency. Sellers would be obliged to comply with the TCS provisions, while buyers might face stricter KYC norms while making purchases."

Deloitte India Partner Alok Agrawal clarified the 1% TCS will be on the overall sale price of the above-mentioned products, provided that the transaction amount is more than Rs 10 lakh. That is intended to expand the tax net in view of increasing expense on luxury products and may lead to further queries on high-net-worth individuals (HNIs) purchasing those items but could not be revealing income or returning tax.

Amit Maheshwari, Tax Partner at AKM Global, also added that this step widens the TCS scheme to high-value products like wristwatches, art, antiques, yachts, and collectibles and thus broadens the tax net beyond motor vehicles.

This step is an indication of the government's continuous push to boost tax compliance and transparency in luxury goods marketplaces.