New Tax Rule from April 22, 2025: 1% TCS on Luxury Goods Above ₹10 Lakh

New Tax Rule from April 22, 2025

From April 22, 2025, a new tax rule has come into effect that will impact individuals purchasing high-end items. The Income Tax Department has notified that a 1% Tax Collected at Source (TCS) will now be levied on the purchase of certain luxury goods worth more than ₹10 lakh.

This change was first introduced through the Finance Act, 2024, and is now being operationalised to increase transparency in high-value transactions and broaden the tax net.

🧾 What Is TCS on Luxury Goods?

TCS (Tax Collected at Source) is a tax collected by the seller from the buyer at the time of sale of certain goods. Under this new rule, 1% TCS will be collected on the sale of luxury goods, provided the transaction value exceeds ₹10 lakh.

This amount will be deposited by the seller to the Income Tax Department and will be reflected in the buyer’s Form 26AS. Buyers can claim credit of this TCS while filing their income tax return (ITR).

👜📿🕶️ List of Notified Luxury Goods (Subject to 1% TCS)

According to the government notification, the following items are now considered luxury goods under this rule:

If the value of any of these items exceeds ₹10 lakh in a single invoice, 1% TCS will be applicable on the total sale value.

📊 Example to Understand TCS on Luxury Goods

Example: A customer purchases a designer handbag for ₹12 lakh.

• Sale Price = ₹12,00,000
• TCS @ 1% = ₹12,000
• Total Amount Payable = ₹12,12,000

The seller collects ₹12,000 as TCS and deposits it with the government under the buyer’s PAN. This amount is available as credit in the buyer’s income tax records.

🔍 Purpose Behind This Tax Rule

The 1% TCS on luxury goods is not just about revenue collection. It is part of a wider effort to increase transparency in high-value transactions and prevent the circulation of black money in luxury markets.

Key Objectives:

• Track and monitor high-value luxury purchases
• Widen the taxpayer base
• Curb undisclosed income or spending
• Bring consistency and simplicity to TDS and TCS provisions

This is aligned with the Union Budget’s aim to simplify the tax system and reduce ambiguity around tax deductions and collections.

🧾 TDS vs TCS: What’s the Difference?

👥 Who Needs to Be Aware of This Rule?

✅ Buyers of Luxury Goods

• Be ready to pay an extra 1% at checkout.
• Ensure your PAN is linked to the transaction.
• Track your Form 26AS to claim the TCS amount while filing ITR.

✅ Sellers/Dealers of Luxury Products

• Register under TCS provisions if not already done.
• Deduct and deposit TCS on qualifying sales.
• File TCS returns (Form 27EQ) regularly.
• Maintain proper invoice and PAN records for all sales above ₹10 lakh.

💡 What Happens If TCS Is Not Collected?

If a seller fails to collect TCS:

• They may face interest and penalties.
• The buyer will still be liable to report the transaction while filing ITR.
• There may be scrutiny by the Income Tax Department in cases of large luxury purchases without TCS.

📆 Effective Date and Compliance

• Effective Date: April 22, 2025
• Applicable to all sellers and buyers of notified luxury goods
• Threshold: Purchase value exceeding ₹10,00,000
• TCS Rate: 1% of sale value

📝 Final Thoughts

The 1% TCS rule on luxury goods is a compliance-focused move by the government aimed at monitoring luxury spending and ensuring tax coverage across sectors. Whether you’re a buyer, seller, or collector, it’s essential to understand and follow these rules.

This is just one of the many tax reforms introduced in recent years to modernize India’s tax system and promote clean, transparent financial practices.

Source Link – https://l1nq.com/lGCFT

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