Luxury goods sold for over Rs 1 million will now attract 1% tax

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Luxury goods such as handbags, watches, footwear and sportswear are priced over Rs 1 million and will now attract a 1% tax charged at Source (TCS).

The Income Tax Department has notified TCS of the suitability for sale at a rate of 1% for sale of designated luxury goods, with a sale price of over Rs 1 million, effective April 22, 2025.

TCS’s luxury provisions were proposed through the 2024 Finance Act, part of the budget proposed in July 2024.

The obligation to collect TC shall be on the seller such as watches, such as watches, paintings, sculptures and antiques, including coins and stamps, yachts, helicopters, luxury handbags, solar, solar, footwear, footwear, high-end sports dramas and equipment, home theaters and home theaters, as well as horse competitions, and collectible items for competitions.

Nangia Andersen LLP tax partner Sandeep Jhunjhunwala said the notification was intended to enhance monitoring of high-value discretionary expenditures and strengthen audit trails in the luxury sector.

It reflects broader policy objectives to expand the tax base and increase financial transparency.

“Sellers will now be required to ensure timely compliance with TCS regulations, and notifying buyers of luxury goods may experience enhanced KYC requirements and documentation when purchasing.

Mr Jhunjhunwala added: “While the luxury industry may face some transitional challenges, this measure is expected to promote formalization and improve regulatory oversight over time.”