The Indian government has rolled out a fresh tax rule that could affect anyone planning to splurge on high-end products. Effective from April 22, 2025, a new income tax TCS of 1% will be levied on the purchase of certain luxury goods priced above ₹10 lakh. This move is aimed at tightening financial monitoring and ensuring high-value transactions are better tracked.
Let’s break down what this means for buyers and sellers.
What the New Income Tax TCS of 1% Covers
This new rule applies to a wide range of luxury items. If you’re buying any of the following and the price exceeds ₹10 lakh, you’ll now need to pay an additional 1% Tax Collected at Source:
- Wristwatches
- Paintings, sculptures, antiques
- Collectible items like coins or stamps
- Yachts and helicopters
- Luxury handbags and sunglasses
- Designer footwear and high-end sportswear
- Home theatre systems
- Horses used for racing or polo
Whether it’s art for your living room or a helicopter for personal use, the new income tax TCS of 1% applies across the board.
How the 1% TCS Will Be Collected
Under this new rule, the seller is responsible for collecting the 1% TCS from the buyer at the time of payment. So if you’re buying a luxury handbag worth ₹15 lakh, expect to pay an extra ₹15,000 as TCS.
The collected tax will be deposited with the government under the buyer’s PAN (Permanent Account Number). This ensures that the transaction is officially recorded and can be traced during income assessments.
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What Buyers Should Know
The good news is, this isn’t a tax you’re going to lose forever. The amount you pay as part of the new income tax TCS of 1% can be claimed as a credit while filing your Income Tax Return (ITR).
If your total tax liability is lower than the TCS amount paid during the year, you can even claim a refund. So while it may feel like an added cost upfront, it’s not necessarily money lost.
Why This Rule Has Been Introduced
The key reason behind introducing the new income tax TCS of 1% is not just to generate more tax revenue. Instead, the focus is on increasing financial transparency, ensuring better income traceability, and discouraging under-the-table deals in the luxury market.
With the rise of high-end consumerism in India, this move is part of the government’s larger effort to expand the tax base and strengthen the audit trail for big-ticket purchases. It’s a step toward curbing tax evasion and making sure that those who spend big also disclose their income accurately.
Final Thoughts
The new income tax TCS of 1% may seem like a small percentage, but it’s a powerful tool in the government’s mission to tighten oversight of luxury spending. For buyers, it’s important to be aware of the rule and factor in the additional cost when making high-value purchases.
For sellers, compliance is now mandatory—collecting and depositing the tax correctly will be crucial to avoid penalties.
Whether you’re a buyer or a seller, staying informed about tax changes like this helps ensure smooth transactions and fewer surprises during tax season.
