Watches, paintings, statues, glasses, shoes, horses; tax to be levied on purchase of luxury items over Rs 10 lakh, check details

According to a notification from the Income Tax Department, handbags, watches, shoes, and sportswear worth more than Rs 10 lakh will now attract 1% Tax Collected at Source (TCS). For example, if you buy goods worth Rs 30 lakh, the seller will charge Rs 30,000 as tax. From January 1, 2025, 1% TCS is already being levied on vehicles worth more than Rs 10 lakh. The Income Tax Department released another list on Tuesday in this regard. 

On what items will the tax be levied?

The list released on April 22 includes watches, paintings, statues, antiques, coins, stamps, pots, helicopters, luxury handbags, sunglasses, shoes, expensive sportswear, home theatre systems, and racing/polo horses.

From when is this tax applicable to the list of luxury goods?

The CBDT notification states that the tax on this list of luxury goods will be collected with effect from April 22, 2025.

Can one claim a refund while filing for an Income Tax Return? 

Like TDS, one key benefit of TCS is that you may claim a refund for the amount when filing your Income Tax Return (ITR). If the amount of TCS is more than your tax liability, then a refund can be obtained.

What is the TCS system?

TCS is collected from the buyer at the time of sale of goods, and the buyer can adjust it against his tax liability while filing his ITR.

What is the purpose?

TCS does not give the government any extra money, but it helps the tax department to track high-value expenses as PAN details have to be provided at the time of purchase.

When was the provision first introduced?

The provision of TCS on vehicles and luxury goods costing more than Rs 10 crore was introduced through the Finance Act, 2024 as part of the budget presented in July 2024. According to Budget 2024, the expenditure of rich people on luxury goods is increasing, so this rule has been made to widen the tax net. The Budget 2024 memorandum stated that the TCS on luxury goods will be applicable from January 1, 2025.

The TCS levy for motor vehicles had come into effect from January 1, while the other categories of goods have been notified now.