The Indian government is set to implement significant amendments to taxation rules, aiming to widen the tax base and enhance revenue collection. Starting January 1, 2025, purchases of luxury goods exceeding ten lakh rupees will be subject to Tax Collected at Source ( TCS ). This move comes as part of amendments to sub-section (1F) of Section 206C, which currently mandates TCS on high-value motor vehicle sales.
The amended legislation will empower sellers to collect 1% of the sale consideration from buyers at the time of transaction for specified luxury items. While the exact list of goods is yet to be finalised by the Central Government, it is expected to encompass high-end products such as designer handbags, luxury watches, and other upscale items popular among high-net-worth individuals.
This development follows recent changes in TCS rates applicable to foreign travel and remittances under the Liberalised Remittance Scheme (LRS), where rates have been adjusted to 20% for certain transactions effective October 1, 2023.
Transactions related to educational and medical expenses abroad remain exempt from TCS up to specified limits, providing relief for essential expenditures.
The upcoming implementation of TCS on luxury goods may ensure an equitable contribution to national revenue streams from affluent consumer sectors.
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