Thinking of buying something over Rs 10 lakh? You will have to pay a small tax. In a notification released by the Income Tax Department on April 22, 1 percent Tax Collected at Source (TCS) will be levied on luxury items priced over Rs 10 lakh.
TCS is the tax payable by a seller which he collects from the buyer at the time of sale.
List of luxury goods that fall under the 1% TCS
- Art pieces: Antiques, painting, sculptures
- Accessories: Wrist watches, sunglasses, handbags, and shoes
- Collectables: Coins and stamps
- Sportswear: Golf-kit, ski-wear
- Transportation: Yacht, rowing boat, canoe, helicopter
- Home theatre system
- Horses for racing and polo games
What it means: When you're buying luxury goods worth Rs 10 lakh or above, you will have to pay an additional 1% TCS on the amount. The move is not for additional revenue but to expand the taxpayer base and ensure accurate income disclosures.
It is believed that many professionals and business owners under-report their income to avoid taxation. Now, the government has intensified its focus on high-value transactions to cross-check tax returns with actual purchases and prompt individuals to update their tax filings accordingly.
“This notification extends TCS coverage to luxury goods and collectibles, improving traceability of high-end spending,” Amit Maheshwari, tax partner at AKM Global, a tax and consulting firm told the Times of India.
Effective immediately, the government will be collecting this tax. This move is expected to help the government keep a closer eye on the purchase and sale of luxury goods.