CBDT Expands TCS Scope: Taxing Luxury with Notification 35/2025

Understanding the Impact of CBDT Notification 35/2025 on High-End Purchases

4/23/20251 min read

On April 22, 2025, the Ministry of Finance, through the Central Board of Direct Taxes (CBDT), issued Notification No. 35/2025 amending the Income-tax Rules, 1962. This amendment primarily affects Form 27EQ and expands the scope of Tax Collected at Source (TCS) under Section 206C of the Income-tax Act, 1961. The notification brings certain high-end and luxury items under the TCS umbrella.

What’s New in the Amendment?

The following luxury and lifestyle products now require TCS on their sale:

Wrist watches
Art pieces (e.g., antiques, paintings, sculptures)
Collectibles (e.g., coins, stamps)
High-end transport items (e.g., yachts, helicopters, canoes)
Luxury accessories (e.g., sunglasses, handbags, purses)
Footwear and sports equipment (e.g., golf kits, ski-wear)
Home theatre systems
Horses for racing or polo

These have been added to Form No. 27EQ under specific codes (6C MA to 6C MJ), ensuring easier compliance and tracking.

Importance of the Notification

Widening the TCS Net: By including luxury items, the government is aiming to:
- Improve tax compliance,
- Curb tax evasion,
- Increase transparency in high-value transactions.
Behavioral Check: These provisions also act as a soft check on lavish spending patterns, nudging people to be tax-compliant when purchasing expensive goods.
Data Tracking for Better Audits: TCS enables authorities to track purchases that may not align with reported income, helping in assessments and audits.

Advantages of the Amendment

Revenue Generation: Increases the government’s revenue from indirect collection.
Better Compliance: Encourages buyers and sellers to stay within the tax net.
Plugging Loopholes: Reduces the opportunity to underreport wealth or high-value expenditures.
Equity in Taxation: Targets the affluent segment without burdening the middle and lower-income groups.

Opinion: A Step in the Right Direction

This amendment is a strategic move to ensure that individuals with high-value consumption habits contribute fairly to the nation’s tax system. It doesn't introduce new taxes but ensures that tax is collected at the source, reducing the burden on enforcement agencies.

However, the implementation needs to be smooth and well-communicated, especially to luxury retailers and sellers of niche goods, to avoid confusion or non-compliance.

Conclusion