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TCS on Car Purchase: A Detailed Guide

  • Writer: Rajesh Kumar Kar
    Rajesh Kumar Kar
  • Apr 1
  • 8 min read

The Income Tax Act's TCS on car purchases mandates that dealers and sellers collect a portion of the sale price as tax from purchasers at the time of the transaction. By facilitating the tracking of significant transactions by tax authorities, it helps to ensure that tax gets collected at the point of transaction. A TCS refund might be available if you recently bought a car. The tax collected by the car vendor on behalf of the buyer is known as TCS or Tax Collected at Source. One percent of the car's purchase price is the amount of TCS collected. This blog article will go over how to get a TCS refund for the automobile you bought. We will provide instructions on how to proceed and obtain your refund.

Table of Contents

What is TCS on Car Purchase?

Tax Collected at Source (TCS) is a tax collected at the source. The vendor of an automobile collects this tax on behalf of the buyer. One percent of the car's purchase price is the amount of TCS collected. Any motor vehicle sale worth more than 10 lakh rupees is subject to TCS. Within 30 days following the transaction, the seller must collect TCS from the buyer and deposit it with the government. If they are not required to pay income tax, the buyer may request a TCS refund from the government. Form 27D, a certificate from the car vendor, must be submitted with the buyer's income tax return to receive a TCS refund. Within a year after the buyer files their income tax return, the Income Tax Department will return the TCS amount.


Eligibility for TCS Refund on Car Purchase

Not all car buyers subject to TCS are eligible for a reimbursement. The buyer's income tax liability is the primary determinant of eligibility for a TCS refund. The buyer may request a refund if the total amount of taxes collected by TCS is above their entire tax obligation for the fiscal year. If the buyers' total tax liability does not warrant this upfront collection, this clause makes sure that they are not unjustly burdened.


Rate of TCS on Car Purchases

TCS, or Tax Collected at Source, is a tax that may be applied when buying an automobile in India if the vehicle is worth more than Rs. 10 lakh. Introduced under the Income Tax Act, this tax gets paid by the seller and applies to all motor vehicle types that satisfy the requirements. Planning your car purchase and efficiently handling your tax obligations depend on your ability to comprehend the TCS rate.


Key Takeaway: TCS is a tax system that applies to auto purchases over Rs. 10 lakh, with different rates based on the car's worth. 

In 2024, the TCS rate will be 1% of the sale price when buying a car worth more than Rs. 10 lakh. Whether the purchase is for personal or corporate use, this pricing is still in effect. The vendor collects the tax subtracted at the time of sale. After that, the buyer's Form 26AS shows this TCS amount, which they can use to offset their overall tax obligation on their income tax return.


Key Takeaway:  You can offset your tax cost by using the current 1% TCS rate for car purchases exceeding Rs. 10 lakh.

If the value of a typical car purchase surpasses Rs. 10 lakh, the TCS rate stays at 1%. The government may, however, occasionally levy additional taxes or levies, especially on luxury or high-end cars, but these are not related to TCS. To prevent confusion, it's critical to distinguish TCS from other taxes. The TCS rate is tied to the sale price threshold and does not rise in response to the kind of vehicle.


Key Takeaway: Other taxes may be imposed based on the kind and value of the car, even if the TCS rate gets set at 1% for all automobiles over Rs. 10 lakh.

The vehicle's sale price is directly related to the TCS amount. If you buy a car for Rs. 15 lahks, the TCS amount would be Rs. 15,000, or 1% of Rs. 15 lahks. With the car's sale price, the seller collects this TCS at the time of purchase. Except for variations in the sale price, the amount of TCS collected remains constant. After that, the buyer's PAN shows this tax claimed when filing an ITR.


Key Takeaway: When the car's worth surpasses Rs. 10 lakh, the TCS amount rises proportionately with the sale price, accounting for 1% of the total.


Steps to Claim TCS Refund on Car Purchases

  • The Income Tax Return (ITR) filing process: Applying for a TCS refund begins with filing your income tax return (ITR) for the fiscal year. Verify the accuracy of all income sources and that the TCS amount is on the tax credit statement (Form 26AS).


  • Report TCS in Your ITR: In the TCS section of your ITR, provide the TCS amount. This sum gets deducted from your overall tax obligation for the year.


  • Make an ITR refund claim: In ITR, you can claim a refund if your entire tax liability (including TDS, TCS, and advance tax) is less than the taxes you have already paid after taking your TCS into account. To get the refund straight into your bank account, you must enter the correct bank information on your ITR.


  • Verification and Processing: The Income Tax Department will process your ITR after you file it. If all information provided is accurate and a refund is deemed necessary, the money is deposited into the bank account listed on your ITR.


How TCS Affects Buyers and Sellers

Buyers

  • Immediate Effect on Buyers: High-value car buyers will pay 1% more than the vehicle's purchasing price.


  • Tax Credit: When filing income tax returns, the TCS amount paid may be claimed as a tax credit, lowering the total tax obligation.


Sellers

  • Sellers' Collection Obligation: The sellers must gather and submit it to the authorities.


  • Compliance: To avoid fines, sellers must ensure the collected TCS is properly documented and remitted on time.


Why TCS is Important

TCS is more than just another tax; it fulfils several crucial functions.

  • Compliance and Tracking: TCS guarantees adherence to tax regulations and assists the government in monitoring high-value transactions.

  • Generation of Revenue: It helps the government raise money for public welfare initiatives.

  • Transparency: TCS makes purchasing and selling more transparent, particularly for expensive goods like autos.


Special Considerations for TCS on Cars

The following is how TCS gets used while buying a car:

  • Threshold:  TCS is effective only when an automobile's sale price surpasses a specific threshold. Many countries have chosen Rs. 10 lakhs (1 million rupees) as this threshold. Any automobile sold for more than this will be subject to TCS.


  • Rate: For auto purchases beyond the designated level, the TCS rate is typically 1%. For instance, if you buy a car for Rs. 12 lakhs, the seller will collect Rs. 12,000 (1% of Rs. 12 lakhs) as TCS.


Tips for Smooth TCS Refund Process

Maintain Accurate Records: Have all of the paperwork about the automobile purchase and TCS payment close at hand. Should the IT Department need any explanations, they will be most important.


Keep an eye on Form 26AS: Verify your Form 26AS regulatory to ensure the amount collected by the vendor and the TCS credit match.


ITR Filing on Time: Don't put off filing your ITR since this may cause the refund procedure to take longer.


Consult a Tax specialist: If you have any questions regarding the procedure, speak with a tax specialist. They expedite the refund procedure and offer personalized guidance.


Conclusion

The tax collected by the car vendor on behalf of the buyer is known as TCS or Tax Collected at Source. One percent of the car's purchase price is the amount of TCS collected. This blog article will go over how to get a TCS refund for the automobile you bought. We will provide instructions on how to proceed and obtain your refund.


FAQ

Q1. What is TCS in the context of car purchases?

The acronym TCS represents Tax Collected at Source. It is a tax that the seller collects from the buyer when the car is worth more than Rs. 10 lakh.


Q2. How much TCS is collected on a car purchase?

The TCS rate is 1% of the sale price for automobile purchases over Rs. 10 lakh.


Q3. Is TCS applicable on all car purchases?

TCS is imposed on automobile purchases that cost more than Rs. 10 lakh. It is applicable to both new and old automobiles.


Q4. How can I claim a TCS refund after purchasing a car?

You can file your Income Tax Return (ITR) for a TCS refund. The TCS amount reduces your tax obligation after being credited to your PAN  on Form 26AS.


Q5. What should I do if TCS is not correctly reflected in my Form 26AS?

If your Form 26AS does not accurately reflect TCS, you should contact the vendor to ensure they have deposited the TCS amount with the government. You might need to contact the Income Tax Department if the disparities continue.


Q6. Are there any exemptions to paying TCS on a car purchase?

Under the Income Tax Act, some purchasers, including government entities, embassies, and some foreign organizations, could not be required to pay TCS on automobile sales.


Q7. Can I claim a TCS refund if I've purchased a car through a loan?

Sure, even if you took out a loan to buy a car, you can still get your money back from TCS. The TCS is applied to the entire sale price, regardless of how the purchase gets financed. The refund process will begin when you include the TCS amount in your income tax return.


Q8. How long does it typically take to receive a TCS refund after filing an income tax return?

Although the processing period for TCS refunds varies, it usually takes two to three months following the income tax return submission. To prevent delays, make sure all the information is correct. Using your PAN, you can use the income tax portal to see the status of your refund.


Q9. Is TCS applicable on second-hand car purchases?

TCS is typically not applicable when buying a used car from an individual. However, TCS can be applied if you purchase a used car from a registered dealer and the transaction price surpasses ₹10 lakhs. If in doubt, always check with the seller or a tax expert.


Q10. What happens if the car seller doesn't provide a TCS certificate?

Contact the vendor immediately and ask for a TCS certificate if they don't already have one. This paperwork is essential to collect your refund. Report the matter to the Income Tax Department if the seller declines. Form 26AS is another source of TCS information.


Q11. Can NRIs claim TCS refund on car purchases in India?

Yes, NRIs who buy cars in India can receive a TCS refund. They must follow the same procedure as residents and file their income tax returns in India. NRIs must informed of any particular tax agreements between India and their home nation.


Q12. How does TCS on car purchases affect my overall tax liability?

In essence, TCS is a pre-paid tax on auto purchases. It lowers the amount of taxes you owe for the fiscal year. The TCS amount gets deducted from the overall taxes owed when you file your income tax return, which could lead to a refund or a smaller final tax payment.


 



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