As per the Finance Minister’s announcement made in the July 2024 Budget, a new tax collected at source (TCS) has been imposed on a specified list of luxury goods sold in India effective from April 22, 2025. In this regard the Central Board of Direct Taxes (CBDT) has issued two notifications and one frequently asked questions (FAQs) circular. The first notification is about the nature of luxury goods, while the second one is about the tax rate and threshold purchase amount above which tax will be levied.
Read below to know more about TCS on luxury goods.
Frequently Asked Questions (FAQs) about TCS on luxury goods
According to an Income Tax Department circular released on April 24, 2025, here are the details:
Q.1 What changes were brought in section 206C(1F) of the Income Tax Act, 1961 through Finance (No. 2) Act, 2024?
Answer: Earlier, Section 206C(1F) provided for collection of tax at source (TCS) on sale of motor vehicles of value exceeding Rs 10 lakh. Vide Finance (No. 2) Act, 2024, section 206C(1F) was amended to provide that TCS will also be levied on any other goods of value exceeding Rs 10 lakh, as may be notified by the Central Government in the Official gazette.
Q.2 Which are the luxury goods of value exceeding Rs 10 lakh on which TCS will be levied?
Answer: Vide CBDT Notification No. 36/2025 dated 22.4.2025 SO 1825(E), the following goods of the value exceeding ten lakh rupees have been notified for collection of tax at source as specified in sub-section (1F) of section 206C of the Act –
Chartered Accountant Gopal Bohra , Partner, Direct Tax, N. A. Shah Associates LLP, says: "The business which are dealing in specified luxury items, that cost over Rs 10 lakh, will collect TCS @ 1% from the buyer of goods and the TCS so collected shall be over and above the purchase value of the goods. The buyer will be able to claim credit of such TCS while filling his ITR. Through this reporting, the income tax department will be able to track high value transactions and in case the income declared by the taxpayer in his ITR does not justify such high value spending, tax department may further enquire about the sources of such spendings."
Q.3 Whether TCS will be levied on sale of a single item of the notified goods of value exceeding Rs 10 lakh?
Answer: Yes, TCS will be levied on sale of a single item of the goods of the nature specified in the above table which is of the value exceeding Rs 10 lakh.
Q.4 When will the new provisions become effective?
Answer: The new provisions will become effective from the date of publication of notification i.e. 22.04.2025.
Can the buyer be held in default if the seller of specified luxury goods does not deduct TCS?
According to Bohra, "The primary responsibility of TCS on high value specified luxury items is on the seller of goods and if seller fails to collect such tax, the buyer of goods is not in default. If the seller after collecting the TCS did not deposit the same with the government, he shall be liable for penal consequences in accordance with the law. However, in such a scenario, the buyer of goods may find difficulty in getting credit of such TCS as the same will not reflect in his 26AS statement. In that event the buyer may approach to the seller to deposit the TCS with the government so that appropriate credit reflects in his 26AS statement or file a complaint to the jurisdictional TDS officer of the seller about non deposit of TCS collected from him."
What is the rate of TCS on specified luxury goods?
TCS will be collected by the seller of such specified luxury goods at 1% rate on the entire value (of any of the notified items) so long as the sale consideration exceeds Rs 10 lakh.
Do note that TCS is not any extra tax, it’s merely sort of an advance tax which can be claimed at the time of income tax return (ITR) filing. Once the seller collects TCS from you, they will deposit it with the government and also file a TCS return intimating that he collected TCS against your PAN. Once the TCS amount is deposited against your PAN, then you can use it to claim an income tax credit and pay a lower tax in the ITR filing.
Do remember to collect the TCS certificate from the seller once the income tax is deposited against your PAN.
Read below to know more about TCS on luxury goods.
Frequently Asked Questions (FAQs) about TCS on luxury goods
According to an Income Tax Department circular released on April 24, 2025, here are the details:
Q.1 What changes were brought in section 206C(1F) of the Income Tax Act, 1961 through Finance (No. 2) Act, 2024?
Answer: Earlier, Section 206C(1F) provided for collection of tax at source (TCS) on sale of motor vehicles of value exceeding Rs 10 lakh. Vide Finance (No. 2) Act, 2024, section 206C(1F) was amended to provide that TCS will also be levied on any other goods of value exceeding Rs 10 lakh, as may be notified by the Central Government in the Official gazette.
Q.2 Which are the luxury goods of value exceeding Rs 10 lakh on which TCS will be levied?
Answer: Vide CBDT Notification No. 36/2025 dated 22.4.2025 SO 1825(E), the following goods of the value exceeding ten lakh rupees have been notified for collection of tax at source as specified in sub-section (1F) of section 206C of the Act –
Chartered Accountant Gopal Bohra , Partner, Direct Tax, N. A. Shah Associates LLP, says: "The business which are dealing in specified luxury items, that cost over Rs 10 lakh, will collect TCS @ 1% from the buyer of goods and the TCS so collected shall be over and above the purchase value of the goods. The buyer will be able to claim credit of such TCS while filling his ITR. Through this reporting, the income tax department will be able to track high value transactions and in case the income declared by the taxpayer in his ITR does not justify such high value spending, tax department may further enquire about the sources of such spendings."
Q.3 Whether TCS will be levied on sale of a single item of the notified goods of value exceeding Rs 10 lakh?
Answer: Yes, TCS will be levied on sale of a single item of the goods of the nature specified in the above table which is of the value exceeding Rs 10 lakh.
Q.4 When will the new provisions become effective?
Answer: The new provisions will become effective from the date of publication of notification i.e. 22.04.2025.
Can the buyer be held in default if the seller of specified luxury goods does not deduct TCS?
According to Bohra, "The primary responsibility of TCS on high value specified luxury items is on the seller of goods and if seller fails to collect such tax, the buyer of goods is not in default. If the seller after collecting the TCS did not deposit the same with the government, he shall be liable for penal consequences in accordance with the law. However, in such a scenario, the buyer of goods may find difficulty in getting credit of such TCS as the same will not reflect in his 26AS statement. In that event the buyer may approach to the seller to deposit the TCS with the government so that appropriate credit reflects in his 26AS statement or file a complaint to the jurisdictional TDS officer of the seller about non deposit of TCS collected from him."
What is the rate of TCS on specified luxury goods?
TCS will be collected by the seller of such specified luxury goods at 1% rate on the entire value (of any of the notified items) so long as the sale consideration exceeds Rs 10 lakh.
Do note that TCS is not any extra tax, it’s merely sort of an advance tax which can be claimed at the time of income tax return (ITR) filing. Once the seller collects TCS from you, they will deposit it with the government and also file a TCS return intimating that he collected TCS against your PAN. Once the TCS amount is deposited against your PAN, then you can use it to claim an income tax credit and pay a lower tax in the ITR filing.
Do remember to collect the TCS certificate from the seller once the income tax is deposited against your PAN.
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