1% TCS on luxury goods could fetch government up to Rs 200 crore annually

The Indian government is now looking to tighten tax compliance among high-income earners. Starting April 22, luxury items priced over Rs 10 lakh — such as watches, handbags, art, home theatre systems, yachts, and even racehorses—will attract a 1% tax collected at source (TCS), as notified by the Central Board of Direct Taxes.

Per government sources, the government could potentially earn Rs 140–210 crore annually from the 1% levy. The actual revenue may be even higher, depending on how much of the luxury car and jewellery market falls under this pricing slab. Factoring in these categories, the number could inch closer to Rs 500 crore annually, as per sources. 

“This was announced in the budget, and the purpose is not increasing direct collections, but to use TCS as a compliance tool,” an official shared with Business Today TV. 

In a notification dated April 22, the income tax department has notified the new rules for the levy of TCS on sales of these luxury items priced over Rs 10 lakh. As per the list shared by the department, sale of any wrist watch; any art piece such as antiques, painting, sculpture; any collectibles such as coin, stamp; any yacht, rowing boat, canoe, helicopter; any pair of sunglasses; any bag such as handbag, purse; any pair of shoes; any sportswear and equipment such as golf kit, ski-wear; any home theatre system; and any horse for horse racing in race clubs, for polo, will now attract a 1% TCS.

While this move was first announced in the July 2024 Union Budget, the detailed categories were formalised this week. The intent is twofold: to monitor high-value purchases and align them with income profiles of taxpayers to flag potential tax evasion.

India’s luxury market, according to industry estimates, is pegged at around $17 billion (Rs 1.4 lakh crore) in 2024, and is expected to grow rapidly in the coming decade. Even a conservative estimate suggests that 10–15% of this market involves purchases exceeding Rs 10 lakh — covering luxury watches, art, collectibles, sports gear, boats, and more.