The Central Board of Direct Taxes (CBDT) under the Ministry of Finance has significantly increased the scope of tax collection (TCS) at source under Section 206C of the Income Tax Act. Many expensive luxury items have been brought under its purview, on which 1 percent TCS will have to be paid.
This step has been taken to curb tax evasion and bring the expenditure of expensive items under supervision. It can also become an additional source of revenue for the government amid growing global uncertainties.
Under the revised rules, vendors will now have to take TCS at the rate of 1 percent on the sale of such marked luxury items, which are priced above Rs 10 lakh. This rule has come into effect from 22 April.
Objects of such expensive luxury include wrist clock, designer sunglasses, handbags, artistic items such as paintings and sculptures, stored items such as coins and stamps, sea boats, helicopters, golf kits, ski gear, home theater system and horses used in racing or polo. Earlier, under Section 206C (1F), TCS used to be primarily on such vehicles, which cost above Rs 10 lakh.
In the Finance Bill 2024, the possibility of this provision has been comprehensive and the government has also been allowed to bring other luxury goods under it, which is priced above Rs 10 lakh. This change has been inserted in the Income Tax (Eleventh Amendment) Rules, 2025 and the Form 27 EQ has been revised and included in additional code (MA to MJ).
Tax experts say that this step has been taken so that the consumption of luxury goods can be monitored using TCS. Tax partner of EY India Sameer Kanabar said that the purpose of implementing TCS on luxury goods is to increase the tax base, as well as compare or evaluate taxes paid by the concerned buyers. He said, “By doing this, the buyers on luxury boutique will cost a huge compliance to persuade the buyers to persuade to pay the additional tax, collect the relevant tax data of buyers and file TCS with returns, and to ensure TCS deposit.”
Tax partner Sandeep Jhunjhunwala at Nangia Anderson LLP said that the purpose of implementing this notification is to monitor the discretionary expenditure on more expensive items. Jhunjhunwala said, “The luxury commodity sector may face some challenges related to transactions, but this step is expected to promote the supplementation and improve over time in regulatory surveillance.”
First Published – April 23, 2025 | 11:25 PM IST
