The government has finally clarified the taxation rules on purchases of luxury items. After a few months of anticipation, the Central Board of Direct Taxes (CBDT) issued two key notifications of April 23, 2025 that bring clarity of how the government plans to tax purchases of luxury goods.
The notification states that, effective April 22, 2025, a tax collected at source (TCS) of 1 per cent will be applicable on the purchase of certain high-value goods if their purchase value exceeds Rs 10 lakh.
The government had first made this announcement in the Union Budget 2024, which initially proposed extending the scope of TCS to include luxury items as well. The intention to bring this into effect was made last year in July while specifics had been awaited since.
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Following this notification, the government has now officially defined what qualifies as ‘luxury goods’ for the purpose of TCS. It has also outlined how the tax will be applied.
What Luxury Goods Will Attract TCS On Purchase?
As per the notification, the following ten types of goods will now attract TCS if their value exceeds Rs 10 lakh:
1. Luxury wrist watches
2. Art pieces such as antiques, paintings, sculpture
3. Collectibles such as coin, stamp
4. Yacht, rowing boat, canoe, helicopter
5. Pair of sunglasses
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6. Bag such as handbag, purse
7. Pair of shoes
8. Sportswear and equipment such as golf kit, ski wear
9. Home theatre system
10. Horse for horse racing in race clubs and horse for polo
This means, for instance, you purchased a high-end wristwatch worth Rs 30 lakh, the seller will now collect Rs 30,000 as tax at the point of sale. Similarly, if you acquire an art piece, say a sculpture or antique painting, exceeding the Rs 10 lakh threshold, the TCS rule will apply.
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Why This New Rule?
The rationale, as outlined in the Budget 2024 memorandum was that the government had observed a significant increase in spending on luxury goods by high-net-worth individuals. By imposing TCS on such purchases, the authorities now aim to widen the tax base and monitor high value discretionary spending.
