New 1% TCS Rule on Luxury Goods Above ₹10 Lakh: What Buyers Must Know

India has tightened its tax compliance net by expanding the scope of Tax Collected at Source (TCS). Starting April 22, 2025, sellers must now collect 1% TCS on certain luxury goods priced above ₹10 lakh. This change comes under an amendment to Section 206C(1F) of the Income Tax Act.

Until now, only luxury cars were covered. However, the new rule includes a broader category of high-end items. Buyers will now face an additional tax when purchasing luxury watches, electronics, or premium accessories.

Let’s break down what qualifies as a luxury good, why this rule was introduced, and how buyers can claim this tax credit in their returns.

What Has Changed Under the New TCS Rule?

The Central Board of Direct Taxes (CBDT) has mandated a 1% TCS on the sale of luxury goods when the invoice value exceeds ₹10 lakh. This rule expands the scope of Section 206C(1F), which previously applied only to high-end cars.

Sellers must collect this tax at the time of sale. The collected amount will appear against the buyer’s PAN in Form 26AS and can be claimed while filing the Income Tax Return (ITR).

Which Items Are Now Considered Luxury Goods?

The notification covers a specific list of 10 luxury product categories. While the government has not disclosed each one publicly, the following examples are widely understood to be included:

  • Premium audio systems and home theatres

  • Designer handbags and accessories

  • High-value wristwatches

  • Exclusive fashion apparel

  • Luxury jewelry or collectibles

Importantly, the rule applies to each transaction, not cumulative spending. If one invoice exceeds ₹10 lakh, the 1% TCS applies.

Why Has the Government Introduced This Rule?

This move has a few clear objectives:

  1. Monitoring High-Value Transactions
    The government wants to track high-end purchases more effectively. Linking the transaction with the PAN allows better surveillance of unreported income.

  2. Expanding the Existing Framework
    Previously, only luxury cars attracted TCS. Now, the framework includes a broader range of luxury items.

  3. Curbing Black Money and Cash Payments
    High-end items often see large cash transactions. Collecting TCS and requiring PAN details discourages these practices.

In short, the new rule is not just a revenue measure. It is part of a broader strategy to tighten tax administration.

How Will This Affect Buyers?

This change increases the final price of luxury goods. While the TCS can be claimed later, the buyer must still pay it upfront.

For example:

  • Product Price: ₹10,00,000

  • TCS Amount: ₹10,000

  • Total Paid: ₹10,10,000

Buyers will also need to ensure their PAN is recorded correctly, and that the seller provides a valid invoice mentioning the TCS amount. Additionally, buyers will see this amount reflected in their Form 26AS or AIS during tax filing.

Can You Claim This 1% TCS Back?

Yes, buyers can claim the TCS as a credit while filing their ITR. Here’s how:

  1. Confirm that the seller has reported the TCS with your PAN.

  2. Check your Form 26AS or Annual Information Statement (AIS) for the credited amount.

  3. Include the TCS while filing your ITR. It will adjust against your total tax payable or be refunded if excess tax has been paid.

Proper documentation, including the original invoice and PAN confirmation, is essential.

What Should You Do Before Making a Luxury Purchase?

If you are planning a high-value purchase, consider the following:

  • Add the TCS amount to your total purchase budget.

  • Share your correct PAN with the seller and verify its inclusion in the invoice.

  • Ask for a copy of the invoice showing TCS details.

  • Save the document for ITR filing.

For frequent or high-ticket buyers, it may also help to consult a tax advisor to structure these expenses efficiently.

Conclusion

The 1% TCS on luxury goods above ₹10 lakh adds a layer of accountability to high-value transactions. This measure strengthens tax compliance and reduces the chances of unreported cash dealings.

Buyers can still claim the tax as a credit, but the process demands better record-keeping and attention during purchase. As always, staying informed is the best way to avoid tax troubles and plan purchases smartly.

If you’re unsure about how this rule affects you or how to claim the TCS, connect with our expert by clicking the link below.