Handbags, wrist watches, other luxury items above Rs 10 lakh to attract 1 pc TCS

New Delhi, Apr 23 (PTI) Handbags, wrist watches, footwear and sportswear, priced above Rs 10 lakh will now attract 1 per cent Tax Collected at Source (TCS), as per a notification issued by the Income Tax department.

TCS at 1 per cent rate is currently being levied on motor vehicles costing above Rs 10 lakh effective January 1, 2025.

The Income Tax department on April 22 notified the list of specified luxury goods and collectibles on which 1 per cent TCS will apply henceforth.

The list includes wrist watches, 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.

TCS is collected from the buyer at the time of sale of specified goods and can be adjusted against the tax liability of the purchaser at the time of filing of I-T returns.

TCS does not garner any additional revenue, but helps the tax department to trace high value spending as PAN details have to be submitted at the time of purchase.

The TCS provision for luxury goods as well as motor vehicles costing above Rs 10 lakh was introduced via Finance Act, 2024, as part of the Budget presented in July, 2024.

The obligation to collect TCS shall be on the seller in respect of the notified goods such as wrist watches, 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.

Nangia Andersen LLP Tax Partner Sandeep Jhunjhunwala, said this notification operationalises the government's intent to enhance monitoring of high-value discretionary expenditure and strengthen the audit trail in the luxury goods segment.

It reflects a broader policy objective of expanding the tax base and promoting greater financial transparency.

"Sellers will now be required to ensure timely compliance with TCS provisions, while buyers of notified luxury goods may experience enhanced KYC requirements and documentation at the time of purchase.

"Although the luxury goods sector may undergo some transitional challenges, this measure is expected to promote formalisation and improved regulatory oversight over time," Jhunjhunwala added.

AKM Global Tax Partner Amit Maheshwari said by bringing high-value items into the TCS framework with a 1 per cent rate, the government is widening the tax net beyond just motor vehicles. "This will enhance the traceability of luxury spending," he added. PTI JD CS DRR

Source: PTI