New TCS Rules on Luxury Items Above 10 Lakh

The Ministry of Finance, through the Central Board of Direct Taxes (CBDT), has issued a new notification on 22nd April 2025, introducing significant changes in the Income-tax Rules, 1962. These rules are called the Income-tax (Eleventh Amendment) Rules, 2025, and they come into force from the date of publication in the Official Gazette.

This amendment brings new items under the scope of Tax Collection at Source (TCS). The change has been made in Form No. 27EQ, specifically under Note 11, where a list of goods now requires TCS collection at the time of sale.

The items now covered include:

1. Wrist watches

2. Art pieces like antiques, paintings, and sculptures

3. Collectibles such as coins and stamps

4. Yachts, rowing boats, canoes, and helicopters

5. Sunglasses

6. Handbags and purses

7. Shoes

8. Sportswear and equipment like golf kits and ski-wear

9. Home theatre systems

10. Horses used in horse racing or polo

Above stated Luxurious goods priced above 10 lakh will now attract a 1% tax collected at source (TCS).

Each of these items is assigned a specific TCS code (ranging from MA to MJ), which needs to be properly reported by sellers in their quarterly TCS return using Form 27EQ.

What if a seller does not follow this?

Non-compliance with this notification will lead to consequences such as interest, penalties, and the seller being treated as an assessee-in-default under the Income Tax Act. Hence, it becomes critical for sellers dealing in these categories to update their billing software, train their staff, and ensure timely deposit and reporting of TCS.

This is a clear signal from the department – luxury sales must now pass through the tax lens. All businesses involved in high-value goods must act immediately to align with the new compliance requirements.

For more details, refer to following link for the official notification:

https://incometaxindia.gov.in/communications/notification/notification-35-english.pdf

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