Luxury goods costing above ₹10 lakh will attract TCS (tax collected at source) from January 1, 2025, according to budget documents.

“For proper tracking of such expenses and in order to widen and deepen the tax net, it is proposed to amend sub-section (1F) of section 206C to also levy TCS on any other goods of value exceeding ten lakh rupees, as may be notified by the Central Government in this behalf. Such goods would be in the nature of luxury goods,” according to the budget document.

The TCS on luxury goods has been proposed to be imposed to widen the tax base.

TCS now applies to cars: sub-section 1F of the Section 206C provides that every person, being a seller, who receives any amount as consideration for sale of a motor vehicle of the value exceeding ₹10 lakh, shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 1 per cent of the sale consideration as income-tax.

Vishwas Panjiar, partner, Nangia Andersen LLP, said “Parliament has proposed to delegate the power to notify meaning of “goods” for this purpose to the Central Board of Direct Taxes.

“One would have to wait to see items that gets ultimately notified for the purpose of this provisions.

“The buyer will be able to claim credit of the TCS at the time of filing the return of income,” he said.

The tax is unlikely to dent demand as the items are largely bought by the rich, retailers and market experts said.

According to the Wealth Report 2024 by global consultancy Knight Frank, the number of ultra-high-net-worth individuals (with a net worth of over $30 million) is projected to increase to 19,908 by 2028 from 13,263 in 2023.

This surge in affluent individuals indicates a flourishing demand for luxury goods in India.

According to a report by Bain and Company, India's luxury market is forecast to expand to 3.5 times its current size, reaching the $85 to $90 billion mark by 2030 due to rapid economic growth. These forecasts position India as the fastest-growing luxury market globally.