The Central Board of Direct Taxes (CBDT) has implemented a new regulation mandating a 1% TCS on high-end luxury items priced above Rs 10 lakh. This includes categories such as watches, handbags, footwear, and sportswear. The directive has come into immediate effect.

Tax collected at source (TCS) is the tax payable by a seller which he collects from the buyer at the time of sale of goods. It is new provision under section 206C of Income Tax Act. It is applicable when the total gross receipts or turnover in the previous year was more than Rs. 10 crores.

The decision follows a Ministry of Finance meeting held in March this year. A senior tax official, speaking to the ET Bureau on condition of anonymity. Tracking high-value luxury purchases continues to be a challenge, particularly due to the opacity of the market and practices like the ‘price on request’ tags. The TCS will now help trace these transactions more effectively.”

As reported by ET Retail, additional items subject to the 1% TCS include antiques, yachts, collectibles like rare coins. This initiative aims to enhance transparency and reflects the growing significance of India’s luxury retail sector.

To adhere to the new TCS guidelines, luxury retailers may be required to collect additional documentation from customers during purchases. This move is expected to improve the audit trail, ensure better compliance, and promote accurate revenue disclosure by businesses.