Government Implements 1% Tax on Luxury Items Above ₹10 Lakh
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Synopsis
The Central Board of Direct Taxes has announced a new 1% tax on luxury items exceeding ₹10 lakh, effective April 22, 2025. This includes a wide range of products, aiming to broaden the tax base and improve financial transparency.
Key Takeaways
- 1% TCS on luxury goods over ₹10 lakh.
- Includes watches, handbags, and more.
- Effective from April 22, 2025.
- Strengthens monitoring of discretionary spending.
- Enhances KYC requirements for buyers.
New Delhi, April 23 (NationPress) The Central Board of Direct Taxes has issued new regulations that enforce a 1% tax collected at source (TCS) on luxury items priced over ₹10 lakh, which includes wristwatches, handbags, sunglasses, shoes, and sportswear.
The list also encompasses art objects such as paintings and sculptures, yachts, home theatre systems, and racehorses intended for racing or polo.
The notification from the CBDT indicates that this tax will be imposed starting from April 22, 2025.
The TCS on luxury goods was first mentioned in the July 2024 Budget, which indicated that it would take effect from January 1, 2025.
The Union Budget 2024-25 introduced an amendment requiring sellers of motor vehicles costing ₹10 lakh or more, along with other specified goods, to collect 1% TCS from buyers. However, the official notification for this implementation had not been previously issued.
Sandeep Jhunjhunwala, Tax Partner at Nangia Andersen LLP, noted that this notification realizes the government's aim to improve oversight of high-value discretionary spending and bolster the audit trail within the luxury goods market.
He remarked, "This reflects a larger policy goal of broadening the tax base and enhancing financial transparency. Sellers must now guarantee timely compliance with TCS requirements, while buyers of designated luxury goods may face more rigorous KYC processes and documentation during their purchases."
Alok Agrawal, Partner at Deloitte India, mentioned, "The TCS at 1% will apply to the total value of these specified items as long as the sale price exceeds ₹10 lakh. This initiative aims to expand and deepen the tax net due to the rising expenditure on luxury items. Initially, this may raise more inquiries for high-net-worth individuals (HNIs) purchasing these goods who do not file tax returns or report substantial taxable income."
Amit Maheshwari, Tax Partner at AKM Global, stated, "By including high-value items like wristwatches, art pieces, antiques, yachts, and collectibles priced above ₹10 lakh into the TCS framework at a 1% rate, the government is broadening the tax net beyond just motor vehicles."
