Luxury Goods Now Under Tax Radar: New TCS Rules Announced

Luxury goods over Rs 10 lakh, including handbags, wrist watches, and sportswear, will now face a 1% Tax Collected at Source (TCS). This move by the Income Tax department is aimed at enhancing the audit trail of high-value expenditures, as part of the 2024 Finance Act measures.

The Indian Income Tax department has announced that luxury goods priced over Rs 10 lakh, including handbags, wrist watches, footwear, and sportswear, will be subject to a 1% Tax Collected at Source (TCS) from January 1, 2025.

This new provision, introduced via the Finance Act of 2024, targets an array of luxury items, from art objects and collectible items to high-end sports equipment and home theatre systems, in a bid to increase financial transparency and oversight of high-value purchases.

Experts like Nangia Andersen LLP Tax Partner Sandeep Jhunjhunwala and AKM Global Tax Partner Amit Maheshwari weigh in, emphasizing that these measures enhance traceability in luxury spending and encourage greater compliance, although they may initially pose challenges for the luxury goods sector.

(With inputs from agencies.)