If you’re eyeing a luxury handbag, a designer watch, or even a horse for polo, you may want to double-check the price tag. A 1% tax collected at source (TCS) has been made mandatory on the purchase of certain high-value luxury items priced over ₹10 lakh.
This move, introduced under the Income-tax (Eleventh Amendment) Rules, 2025, aims to tighten the net on high-value discretionary spending and make such transactions more traceable.
The government’s notification includes ten categories of goods that will now attract 1% TCS if they cost above ₹10 lakh.
The list of items includes luxury wrist watches, high-end sunglasses, designer handbags and purses, expensive shoes, artworks such as paintings and antiques, collectables like coins and stamps, as well as yachts, helicopters, horses meant for racing or polo, home theatre systems, and sports equipment including golf kits.
TCS isn’t something unheard of — it’s already in place for luxury motor vehicles costing over ₹10 lakh, under Section 206C (1F) of the Income-tax Act. What’s new is the expansion of this provision to non-automotive luxury items, a change brought in by the Finance Act, 2024.
While motor vehicle TCS kicks in from January 1, 2025, the 1% rate for luxury goods from the newly specified categories has already become active as of April 22.
The idea, it seems, is to increase the government’s visibility on who’s spending big — and where. Since PAN details are mandatory for such purchases, it offers a trail that can be used to detect tax evasion or under-reporting of income.
Sandeep Jhunjhunwala, Tax Partner at Nangia Andersen LLP, suggests this notification reflects a larger goal — to track luxury consumption more closely and possibly widen the tax base. It’s part of a policy direction to promote financial transparency, especially in the upper end of the consumer market.
Let’s say you’re buying a luxury item worth ₹12 lakh. At the time of purchase, the seller collects ₹12,000 (which is 1% of ₹12 lakh) as TCS and deposits it with the tax department. This amount isn’t an additional cost but can be adjusted against your final income tax liability when you file returns.
So, if you’re already a regular taxpayer, it doesn’t burn a hole in your pocket — it just gets balanced out later.
It’s hard to say. The rule gives the government flexibility to notify any other goods in future that might fall under this scheme. While there’s no confirmation yet, some tax professionals think other high-value lifestyle products might eventually make it to the list.
The updated Form 27EQ, used by sellers for TCS compliance, now comes with new codes (from MA to MJ) to categorise these luxury items, making the backend reporting more streamlined.
For someone dropping ₹10 lakh or more on a painting or a Hermes Birkin bag, 1% may not be a deal-breaker. But the move certainly puts a spotlight on such purchases, nudging buyers — and tax planners — to take a closer look at what counts as ‘discretionary’.
The bigger picture? It’s possibly a small step in a long-term effort to bring informal spending into the formal tax ecosystem. Whether it nudges people to rethink their luxury buys or just adds another checkbox to tick, we’ll have to wait and see.
Bottom line: If you’re planning to splurge, just know that the government will be watching — and collecting — a teeny slice of your luxury lifestyle.
