Buying a car worth more than Rs 10 lakh does not just mean a bigger EMI or higher insurance bill. It may also mean you have already paid an extra tax amount that many buyers either forget about or never claim while filing income tax returns.
Every time a customer buys a car priced above Rs 10 lakh, the dealer collects 1% TCS (Tax Collected at Source) and deposits it with the government against the buyer’s PAN.
The problem is that many people either do not notice this amount on their invoice or fail to check whether it has been credited properly in their tax records.
As a result, several taxpayers may be missing out on a tax credit that could either reduce their final tax outgo or increase their refund at the time of filing ITR.
Under Section 206C(1F) of the Act, car dealers are required to collect 1% TCS on the sale of motor vehicles priced above Rs 10 lakh.
This amount is collected from the buyer at the time of purchase and deposited with the government against the buyer’s PAN number.
For example, if someone buys a car worth Rs 15 lakh, the dealer will collect Rs 15,000 as TCS.
This is where many buyers get confused.
TCS is not a separate cashback or direct government benefit. It is treated as a tax credit, similar to TDS.
This means the amount gets adjusted against the buyer’s final tax liability at the time of filing ITR.
If the total tax already paid — including TCS, TDS and advance tax — is higher than the actual tax liability, the excess amount may come back as a refund.
However, if tax liability is higher, the TCS amount simply gets adjusted against dues.
The TCS collected during car purchase usually appears in:
Since it is linked to the buyer’s PAN, taxpayers can verify whether the dealer has deposited the amount correctly.
Tax experts say many buyers are unaware that the extra amount collected during vehicle purchase can later be adjusted while filing returns.
In some cases:
Some buyers who are not regular taxpayers may also not realise that filing returns is necessary to claim any excess tax paid.
People who purchased vehicles above Rs 10 lakh should:
While filing returns, the amount should automatically appear under taxes already paid if it has been deposited properly.
(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)