Section 206C(1F): 1% TCS on Cars & Luxury Goods (2025)

Current position — reviewed 22 August 2026

This levy is in force, with one correction on timing: the extension to notified luxury goods applies to transactions on or after 22 April 2025, being the date of CBDT Notification No. 36/2025, and not from January 2025.

• TCS is collected at 1% on the sale of a motor vehicle above Rs 10 lakh, and on each notified luxury good where the value of that single item exceeds Rs 10 lakh.

• The threshold is tested item-wise for luxury goods, so an invoice totalling more than Rs 10 lakh across smaller items does not by itself attract the levy.

• The rate and the Rs 10 lakh threshold are unchanged as at August 2026.

• For transactions on or after 1 April 2026 the provision is renumbered under the Income-tax Act, 2025 as Section 394, with the same substantive scope; quote the section applicable to the year of the transaction.

The Finance (No. 2) Act, 2024 has brought a game-changing update to Section 206C(1F) of the Income-tax Act. Starting January 1, 2025, Tax Collection at Source (TCS) is no longer limited to high-value motor vehicles but now extends to 10 types of luxury goods. This update marks a strong move toward regulating high-end transactions and enhancing tax compliance.

In this detailed guide by MyFinTax, we break down everything you need to know about the amended Section 206C(1F) — including applicability, rate, timelines, collectors, collectees, and frequently asked questions.

📘 What Is Section 206C(1F)? [Latest Amendment]

Under the amended Section 206C(1F), sellers must collect 1% TCS from buyers when selling:

• A motor vehicle exceeding ₹10 lakh, or
• Any notified luxury good exceeding ₹10 lakh in value.

🔍 Bare Act Language (Amended):

“Every person, being a seller, who receives any amount as consideration for the sale of:

(a) a motor vehicle; or
(b) any other goods, as the Central Government may notify,

of a value more than ₹10,00,000 shall, on receipt of such amount, collect 1% of the sale consideration as income-tax.”

This provision now covers 10 new categories of luxury goods, as notified by the Central Government on April 22, 2025.

🎯 Applicability of TCS on Luxury Items & Vehicles

✅ Applicable from:

• 🚗 Motor Vehicles: Already effective since June 1, 2016
• 💼 Luxury Goods: Notified and applicable from April 22, 2025

🎁 10 Notified Luxury Goods (Effective April 22, 2025):

1. High-end Wristwatches
2. Art pieces: Antiques, Paintings, Sculptures
3. Collectables: Rare Coins, Stamps
4. Yachts, Canoes, Helicopters
5. Luxury Sunglasses
6. Premium Bags & Purses
7. Designer Shoes
8. Branded Sportswear (Golf kits, Ski gear)
9. High-end Home Theatre Systems
10. Race Horses and Polo Horses

👤 Who Is Required to Collect TCS?

🧾 Who is a “Collector”?

The seller must collect TCS if they fall into one of the following categories:

• Central or State Government
• Local authorities
• Companies, Firms, LLPs, Co-operative Societies
• Individuals/HUFs with:
• Business turnover > ₹1 crore (previous FY)
• Professional receipts > ₹50 lakh (previous FY)

🙋‍♂️ Who is a “Collectee”?

The buyer, except when they are:

• Central/State Government
• Foreign diplomatic missions
• Local authorities (per Section 10(20))
• Public Sector Undertakings (engaged in passenger transport)

💰 TCS Rate Under Section 206C(1F)

📌 GST, delivery charges, and other costs are included in the "sale consideration" for TCS.

⏳ When Is TCS Collected?

As per the law, TCS is collected at the time of receipt of consideration, not at the time of sale or invoice.

That means:

• Even part payments or booking advances trigger TCS.
• Once the cumulative amount exceeds ₹10 lakh, the seller must collect TCS at each point of payment received.

📊 Compliance Checklist for Sellers

✅ Register under TCS
✅ Verify buyer's PAN and Aadhaar status
✅ Ensure real-time TCS collection at payment receipt
✅ File quarterly TCS returns (Form 27EQ)
✅ Issue TCS certificates (Form 27D) to buyers
✅ Maintain clean books and transaction logs for audit

🤝 Why This Change Matters

🔎 Transparency: Brings luxury transactions under the tax net

📈 Wider Tax Base: Tracks spending patterns of HNIs

⚠️ Deterrent to Tax Evasion: Ensures accountability in high-end markets

🧾 Document Trail: PAN requirement increases buyer traceability

❓ Frequently Asked Questions (FAQs)

📌 Q1. Is GST included in the TCS calculation?

Yes, TCS is calculated on the total invoice value, including GST, freight, insurance, etc.

📌 Q2. Will this apply to online purchases?

Yes, if the seller meets the TCS criteria and the value exceeds ₹10 lakh, even e-commerce sales are covered.

📌 Q3. Can the buyer claim TCS credit?

Yes. TCS is reflected in Form 26AS of the buyer and can be claimed while filing income tax returns.

🧠 Final Thoughts by MyFinTax

The expansion of Section 206C(1F) is a clear signal from the government to tightly monitor luxury consumption and ensure tax compliance in high-value transactions. Whether you're an auto dealer, luxury brand retailer, or financial advisor — compliance is no longer optional.

💬 Need help with TCS implementation?
📧 Reach out to us at support@myfintax.in or drop your queries in the comments below.