The Income Tax Department has notified the applicability of Tax Collected at Source (TCS) at the rate of 1% on the sale of specified luxury goods, where the selling price exceeds Rs 10 lakh, with effect from April 22, 2025.

Luxury goods like handbags, wristwatches, footwear, and sportswear will be affected by this move.

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As regard the operationalisation of the new rules, sellers will have to deduct TDS on sale of the notified goods such as wristwatch, art objects such as paintings, sculptures, and antiques, collectible items, including coins and stamps, yachts, helicopters, luxury handbags, sunglasses, footwear, high-end sportswear and equipment, home theatre systems, and horses intended for racing or polo.

Notably, the government introduced the TCS provision for luxury goods via the Finance Act, 2024, as part of the Union Budget presented last year in July.

The move is believed to strengthen the audit trail in the luxury segment and reflects the government’s broader goal of financial transparency.

It is worth mentioning that the seller is responsible for depositing the collected TCS against the buyer’s PAN.

This tax is reflected in the buyer’s Form 26AS and can be claimed as a credit while filing their Income Tax Return (ITR).

The government had announced many important changes in the Union Budget related to tax, especially to simplify TDS and TCS.