R. Suryamurthy
The Central Board of Direct Taxes (CBDT) has broadened the scope of tax collection at source (TCS), mandating a 1% levy on the sale of a specified list of luxury goods and collectables valued above ₹10 lakh. Effective today, April 22, 2025, sellers dealing in items ranging from high-end wristwatches and art pieces to yachts and thoroughbred horses will be required to collect this tax from buyers at the point of payment.
In a notification (No. 36/2025) issued yesterday, the CBDT outlined the extensive list of goods now falling under the ambit of Section 206C(1F) of the Income-tax Act. This includes:
Personal Luxuries: Wrist watches, sunglasses, handbags, purses, shoes, sportswear and equipment (golf kits, ski-wear).
Art and Collectables: Antiques, paintings, sculptures, coins, stamps.
High-Value Assets: Yachts, rowing boats, canoes, helicopters, home theatre systems, horses for racing and polo.
To facilitate the reporting of these transactions, the CBDT has also amended Form 27EQ (Notification No. 35/2025), adding a dedicated section for these newly specified goods. This amendment follows the existing row for TCS on the sale of motor vehicles.
Tax experts believe this move signifies the government’s intent to deepen tax penetration into the realm of high-value discretionary spending. “This notification expands the scope of TCS to include luxury goods and collectables,” noted Amit Maheshwari, Tax Partner, AKM Global. “By bringing high-value items… into the TCS framework with a 1% rate, the government is widening the tax net beyond just motor vehicles and will enhance the traceability of luxury spending.”
The CBDT, through notification no. 35/2025, emphasised that this revision of the Income Tax Rules, 1962, aims to broaden the tax base and ensure more effective monitoring of significant financial transactions. The newly introduced Income-tax (11th Amendment) rules, 2025, issued under Section 295 read with Section 206C of the Income-tax Act, 1961, now places a direct obligation on sellers to collect TCS on these specified items.
The government anticipates that this measure will encourage greater compliance and help curb tax evasion in the luxury goods market by providing authorities with a clearer trail of high-value transactions.
Sellers are now mandated to collect the 1% TCS from buyers for any of the listed goods exceeding the ₹10 lakh threshold. This collected tax must be deposited with the Income Tax Department. Buyers, in turn, will see these TCS amounts reflected in their Form 26AS (Annual Statement), ensuring they can claim credit for the tax paid when filing their income tax returns.
The legal framework for this change rests on Section 295 read with Section 206C of the Income-tax Act, 1961. This latest notification follows a previous amendment to the rules issued on April 7, 2025 (Notification G.S.R. 221(E)).
Businesses dealing in these luxury and collectable markets must now adapt their systems and processes to ensure timely and accurate compliance with these new TCS regulations.