The Income Tax Department has said in an official notification that 1 per cent tax collected at source (TCS) will now be levied on wristwatches, handbags, antiques, paintings, sculptures, sunglasses, home theatre systems, footwear and sportswear worth more than Rs 10 lakh at the point of sale from Tuesday.
While the announcement to bring some products besides motor vehicles under TCS was announced in the July 2024 Budget and was supposed to be effective from January 1 this year, the Income Tax Department has now notified other product categories. The move is expected to help tax authorities identify sales of such luxury goods and match them with the income tax profile of taxpayers to detect any potential evasion.
On which products can TCS be levied?
In a notification dated April 22, the Income Tax Department notified new rules for levying TCS on sales of these luxury goods worth more than Rs 10 lakh. According to the list shared by the department, the sale of any wristwatch; Any artwork such as antiques, paintings, sculptures; any collectibles such as coins, postage stamps; any yacht, rowing boat, canoe, helicopter; any sunglasses; any bags such as handbags, purses; any shoes; any sportswear and equipment such as golf kits, ski-wear; any home theatre system; and any horses for racing at race clubs, horses for polo, will now attract 1 percent TCS.
The obligation to collect TCS will lie with the seller in respect of notified goods such as wristwatches, works of art such as paintings, sculptures and antiques, collectibles including coins and stamps, yachts, helicopters, luxury handbags, sunglasses, footwear, high-end sportswear and equipment, home theatre systems and horses bred for racing or polo.
How will TCS help in broadening the tax base?
Tax experts say the move to impose TCS on luxury goods will help in broadening the tax base. Buyers of luxury goods may face additional KYC requirements, they said.
“This notification gives effect to the government’s intention to increase scrutiny on high-value discretionary spending and strengthen the audit trail in the luxury goods category. It reflects a larger policy objective of broadening the tax base and promoting greater financial transparency. Sellers will now have to ensure timely compliance with TCS provisions, while buyers of notified luxury goods may face enhanced KYC requirements and documentation at the time of purchase. While the luxury goods sector may go through some changing challenges, this move is expected to encourage formalisation and improved regulatory oversight over time,” said Sandeep Jhunjhunwala, tax partner, Nangia Andersen LLP.
The Budget for the financial year 2024-25 presented in July 2024 mentioned the amendment of Section 206C of the Income Tax Act. The Finance Act, 2024 stated that the seller of a motor vehicle or any other product specified by the Central Government through notification, worth more than Rs 10 lakh, will have to collect 1 per cent TCS as income tax from the buyer on the sale. The TCS duty for motor vehicles worth more than Rs 10 lakh has come into effect from January 1 this year. Other categories of products have now been notified.
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