CBDT Announces 1% TCS on Luxury Goods Above Rs. 10 Lakh

CBDT Announces 1% TCS on Luxury Goods Above Rs. 10 Lakh. The Central Board of Direct Taxes (CBDT) has introduced a new rule effective from 2025: a 1% Tax Collected at Source (TCS) will now apply on the purchase of luxury goods valued above Rs.10 lakh. This important change is expected to bring more transparency to high-value transactions and widen the tax base. In this article, we will explain the details of this announcement, its purpose, impact, compliance requirements, and more, in a clear and simple manner.
What is TCS?
Tax Collected at Source (TCS) is a tax collected by the seller from the buyer at the time of sale. The seller deposits this tax with the government on behalf of the buyer. TCS is usually applicable on certain specified goods and services, and luxury goods now fall under this category when the purchase value exceeds Rs.10 lakh.
What are Luxury Goods?
Luxury goods typically refer to expensive items that are not essential but are desired for their quality, brand, or status symbol. Examples include high-end cars, designer jewelry, luxury watches, artwork, yachts, and premium electronics. These goods often have a high price tag and cater to a niche market.
Why Has CBDT Introduced 1% TCS on Luxury Goods?
The government aims to track high-value transactions better and ensure tax compliance among individuals purchasing luxury items. Such purchases often indicate a higher income level, and by collecting TCS, authorities can keep a record of potential taxpayers who might otherwise evade tax.
Moreover, this move is part of a broader effort to curb black money and bring more transactions under the formal economy. The data collected through TCS will be helpful in cross-verifying income declarations in tax returns.
When Will This New Rule Apply?
The 1% TCS on luxury goods above Rs.10 lakh will come into effect starting July 1, 2025. All purchases made after this date will be covered under this rule.
Which Goods Are Covered Under the TCS Rule?
Not all goods are covered under this rule. Only specified luxury goods with a value exceeding Rs.10 lakh per transaction will attract 1% TCS. Some examples include:

Luxury cars (with ex-showroom price above Rs.10 lakh)
High-end jewelry
Luxury watches
Fine art pieces
Yachts and private jets
Premium electronics and designer goods

It is important to note that the government may notify a detailed list specifying the covered goods closer to the effective date.
Who Will Collect the TCS?
The seller will be responsible for collecting the 1% TCS from the buyer at the time of sale. After collecting it, the seller must deposit the amount with the government within the prescribed timeline.
For example, if you buy a luxury watch worth Rs.15 lakh, the seller will collect an extra Rs.15,000 as TCS and deposit it on your behalf.
How Will TCS Be Reflected for the Buyer?
The amount collected as TCS will be reflected in the buyer’s Form 26AS (tax credit statement) available on the Income Tax Department’s website. This means the buyer can claim credit for the TCS amount while filing their Income Tax Return (ITR).
Thus, it is not an additional cost but an advance tax payment that can be adjusted against the final tax liability.
Impact on Buyers
For buyers, this change means that purchasing a luxury good above Rs.10 lakh will now involve paying a 1% TCS upfront. Although this amount can be claimed later while filing the ITR, it may temporarily increase the cash outflow at the time of purchase.
Additionally, it will bring more scrutiny from the tax department, as high-value purchases will be closely monitored.
Impact on Sellers
Sellers of luxury goods must now update their billing and accounting systems to incorporate TCS. They need to:

Collect TCS at the time of sale
Issue a proper TCS certificate to the buyer
Deposit the TCS with the government within the due date
File quarterly TCS returns

Non-compliance can result in penalties, interest, and even prosecution under the Income Tax Act.
How is TCS Different from GST?
While GST (Goods and Services Tax) is a tax on the supply of goods and services, TCS is a tax on the transaction value collected by the seller from the buyer. Both taxes are collected at different stages and serve different purposes. GST is paid by the buyer and deposited by the seller, whereas TCS is collected additionally and later adjusted against the buyer's tax liability.
Filing Requirements for Sellers
Sellers must file quarterly TCS returns in Form 27EQ. They must provide details like:

PAN of the buyer
Amount of sale consideration
TCS collected
Date of collection

The TCS returns must be filed on or before the due dates specified under the Income Tax Act. Failure to file returns on time may attract penalties.
How Can Buyers Claim Credit of TCS?
Buyers can claim credit for the TCS collected by mentioning it in their income tax return (ITR). Here’s how:

Check Form 26AS to ensure the TCS amount is reflected.
Fill in the TCS details while filing the ITR.
Adjust the TCS amount against the final tax liability.
If excess tax is paid after adjustment, the refund will be issued by the Income Tax Department.

Penalties for Non-Compliance
Sellers failing to collect or deposit TCS may face consequences such as:

Interest for late payment
Penalty equal to the amount of TCS
Prosecution leading to imprisonment and/or fine under extreme cases

Thus, sellers must be careful to comply with the new rules.
How Will This Change Affect the Luxury Goods Market?
Initially, there may be a slight slowdown in the luxury goods market due to the increased compliance burden and additional cash outflow for buyers. However, in the long run, genuine buyers will adjust to the change as the TCS amount can be claimed back while filing taxes.
Moreover, it will bring better regulation, transparency, and confidence in the luxury goods segment.
Conclusion
The CBDT's decision to introduce 1% TCS on luxury goods above Rs.10 lakh is a strategic move to enhance tax compliance and regulate high-value transactions. While it brings additional responsibilities for sellers and slight cash flow impacts for buyers, it promotes greater transparency in the economy. Buyers should be mindful of claiming their TCS credit, and sellers must ensure proper collection, deposit, and reporting. With proper awareness and compliance, this new rule can be smoothly integrated into the luxury goods market in India.
Frequently Asked Questions (FAQs)
1. What is the effective date for 1% TCS on luxury goods?
The 1% TCS on luxury goods will be effective from July 1, 2025.
2. Will the TCS apply if I buy multiple items under ?10 lakh but the total exceeds ?10 lakh?
TCS is applicable per transaction. If each item is priced below ?10 lakh individually, TCS may not apply unless a specific clarification is issued by CBDT.
3. Can I claim the TCS amount while filing my income tax return?
Yes, the TCS amount will be available in your Form 26AS, and you can claim it as tax credit while filing your ITR.
4. Who is responsible for collecting and depositing the TCS?
The seller of the luxury goods is responsible for collecting TCS and depositing it with the government.
5. What documents will the seller provide after collecting TCS?
The seller will issue a TCS certificate (Form 27D) to the buyer as proof of collection.
6. Will GST also be charged along with TCS?
Yes, GST will continue to apply separately on the sale of goods. TCS is an additional requirement.
7. What happens if a seller does not collect TCS?
Failure to collect TCS can attract penalties, interest, and legal action against the seller.
8. Does TCS mean paying extra tax?
No, TCS is not an extra tax. It is an advance payment of tax which can be adjusted against your final tax liability.
9. Are there any exemptions available under this rule?
As of now, there are no exemptions announced. However, the government may provide clarifications or exemptions for specific cases.
10. Will this rule also apply to international luxury purchases?
This rule applies only to purchases made within India. However, if goods are imported, separate tax and customs regulations will apply.

The Central Board of Direct Taxes (CBDT) has introduced a new rule effective from 2025: a 1% Tax Collected at Source (TCS) will now apply on the purchase of luxury goods valued above Rs.10 lakh. This important change is expected to bring more transparency to high-value transactions and widen the tax base. In this article, we will explain the details of this announcement, its purpose, impact, compliance requirements, and more, in a clear and simple manner.

What is TCS?

Tax Collected at Source (TCS) is a tax collected by the seller from the buyer at the time of sale. The seller deposits this tax with the government on behalf of the buyer. TCS is usually applicable on certain specified goods and services, and luxury goods now fall under this category when the purchase value exceeds Rs.10 lakh.

What are Luxury Goods?

Luxury goods typically refer to expensive items that are not essential but are desired for their quality, brand, or status symbol. Examples include high-end cars, designer jewelry, luxury watches, artwork, yachts, and premium electronics. These goods often have a high price tag and cater to a niche market.

Why Has CBDT Introduced 1% TCS on Luxury Goods?

The government aims to track high-value transactions better and ensure tax compliance among individuals purchasing luxury items. Such purchases often indicate a higher income level, and by collecting TCS, authorities can keep a record of potential taxpayers who might otherwise evade tax.

Moreover, this move is part of a broader effort to curb black money and bring more transactions under the formal economy. The data collected through TCS will be helpful in cross-verifying income declarations in tax returns.

When Will This New Rule Apply?

The 1% TCS on luxury goods above Rs.10 lakh will come into effect starting July 1, 2025. All purchases made after this date will be covered under this rule.

Which Goods Are Covered Under the TCS Rule?

Not all goods are covered under this rule. Only specified luxury goods with a value exceeding Rs.10 lakh per transaction will attract 1% TCS. Some examples include:

Luxury cars (with ex-showroom price above Rs.10 lakh)
High-end jewelry
Luxury watches
Fine art pieces
Yachts and private jets
Premium electronics and designer goods

It is important to note that the government may notify a detailed list specifying the covered goods closer to the effective date.

Who Will Collect the TCS?

The seller will be responsible for collecting the 1% TCS from the buyer at the time of sale. After collecting it, the seller must deposit the amount with the government within the prescribed timeline.

For example, if you buy a luxury watch worth Rs.15 lakh, the seller will collect an extra Rs.15,000 as TCS and deposit it on your behalf.

How Will TCS Be Reflected for the Buyer?

The amount collected as TCS will be reflected in the buyer’s Form 26AS (tax credit statement) available on the Income Tax Department’s website. This means the buyer can claim credit for the TCS amount while filing their Income Tax Return (ITR).

Thus, it is not an additional cost but an advance tax payment that can be adjusted against the final tax liability.

Impact on Buyers

For buyers, this change means that purchasing a luxury good above Rs.10 lakh will now involve paying a 1% TCS upfront. Although this amount can be claimed later while filing the ITR, it may temporarily increase the cash outflow at the time of purchase.

Additionally, it will bring more scrutiny from the tax department, as high-value purchases will be closely monitored.

Impact on Sellers

Sellers of luxury goods must now update their billing and accounting systems to incorporate TCS. They need to:

Collect TCS at the time of sale
Issue a proper TCS certificate to the buyer
Deposit the TCS with the government within the due date
File quarterly TCS returns

Non-compliance can result in penalties, interest, and even prosecution under the Income Tax Act.

How is TCS Different from GST?

While GST (Goods and Services Tax) is a tax on the supply of goods and services, TCS is a tax on the transaction value collected by the seller from the buyer. Both taxes are collected at different stages and serve different purposes. GST is paid by the buyer and deposited by the seller, whereas TCS is collected additionally and later adjusted against the buyer's tax liability.

Filing Requirements for Sellers

Sellers must file quarterly TCS returns in Form 27EQ. They must provide details like:

PAN of the buyer
Amount of sale consideration
TCS collected
Date of collection

The TCS returns must be filed on or before the due dates specified under the Income Tax Act. Failure to file returns on time may attract penalties.

How Can Buyers Claim Credit of TCS?

Buyers can claim credit for the TCS collected by mentioning it in their income tax return (ITR). Here’s how:

Check Form 26AS to ensure the TCS amount is reflected.
Fill in the TCS details while filing the ITR.
Adjust the TCS amount against the final tax liability.
If excess tax is paid after adjustment, the refund will be issued by the Income Tax Department.

Penalties for Non-Compliance

Sellers failing to collect or deposit TCS may face consequences such as:

Interest for late payment
Penalty equal to the amount of TCS
Prosecution leading to imprisonment and/or fine under extreme cases

Thus, sellers must be careful to comply with the new rules.

How Will This Change Affect the Luxury Goods Market?

Initially, there may be a slight slowdown in the luxury goods market due to the increased compliance burden and additional cash outflow for buyers. However, in the long run, genuine buyers will adjust to the change as the TCS amount can be claimed back while filing taxes.

Moreover, it will bring better regulation, transparency, and confidence in the luxury goods segment.

Conclusion

The CBDT's decision to introduce 1% TCS on luxury goods above Rs.10 lakh is a strategic move to enhance tax compliance and regulate high-value transactions. While it brings additional responsibilities for sellers and slight cash flow impacts for buyers, it promotes greater transparency in the economy. Buyers should be mindful of claiming their TCS credit, and sellers must ensure proper collection, deposit, and reporting. With proper awareness and compliance, this new rule can be smoothly integrated into the luxury goods market in India.

Frequently Asked Questions (FAQs)

1. What is the effective date for 1% TCS on luxury goods?

The 1% TCS on luxury goods will be effective from July 1, 2025.

2. Will the TCS apply if I buy multiple items under ?10 lakh but the total exceeds ?10 lakh?

TCS is applicable per transaction. If each item is priced below ?10 lakh individually, TCS may not apply unless a specific clarification is issued by CBDT.

3. Can I claim the TCS amount while filing my income tax return?

Yes, the TCS amount will be available in your Form 26AS, and you can claim it as tax credit while filing your ITR.

4. Who is responsible for collecting and depositing the TCS?

The seller of the luxury goods is responsible for collecting TCS and depositing it with the government.

5. What documents will the seller provide after collecting TCS?

The seller will issue a TCS certificate (Form 27D) to the buyer as proof of collection.

6. Will GST also be charged along with TCS?

Yes, GST will continue to apply separately on the sale of goods. TCS is an additional requirement.

7. What happens if a seller does not collect TCS?

Failure to collect TCS can attract penalties, interest, and legal action against the seller.

8. Does TCS mean paying extra tax?

No, TCS is not an extra tax. It is an advance payment of tax which can be adjusted against your final tax liability.