Bought a car above Rs 10 lakh? You can claim TCS refund on your purchase; here’s how

Buying a car worth more than Rs 10 lakh does not just mean paying a bigger EMI, higher insurance premiums, or registration charges. It also attracts an additional tax called Tax Collected at Source (TCS), a component many vehicle buyers either overlook or fail to claim while filing their income tax returns.

Under Section 206C(1F) of the Income Tax Act, dealers are required to collect 1% TCS on the purchase of any motor vehicle if the sale value exceeds Rs 10 lakh. The seller collects this amount from the buyer at the time of payment or invoice generation, whichever occurs earlier, and deposits it with the government against the buyer’s PAN.

For instance, if a customer purchases a car worth Rs 15 lakh, the dealer collects Rs 15,000 as TCS in addition to the vehicle cost and deposits it with the Income Tax Department.

The rule applies to all motor vehicles and is not restricted only to luxury cars. It also applies to both personal-use and business-use purchases.

Who is exempt from TCS on vehicle purchase?

Certain categories of buyers are exempt from TCS provisions. These include:

Central and state governments
Local authorities
Embassies and high commissions
Public sector companies

Apart from these exempt entities, most buyers purchasing vehicles above the prescribed threshold are required to pay TCS.

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What exactly is TCS?

TCS is a tax collected by the seller on specified goods at the time of sale. In the case of cars, the amount collected is linked to the buyer’s PAN and later reflects in tax documents such as Form 26AS and AIS (Annual Information Statement).

The amount functions similarly to advance tax or TDS already deposited with the government and can later be adjusted against the buyer’s final income tax liability.

Tax experts say many car buyers mistakenly assume TCS is an additional non-refundable cost, even though it can often be adjusted or refunded completely depending on the taxpayer’s income.

Can you get a refund for TCS?

Yes. Whether the buyer receives a refund depends entirely on their total tax liability for the financial year.

Full refund possible if:
Annual income is below the taxable limit
Total tax payable is lower than the TCS collected
Excess taxes have already been deducted elsewhere

In such situations, the excess amount can be claimed as a refund while filing the Income Tax Return (ITR).

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Adjustment against tax liability

If the buyer’s total tax liability exceeds the TCS amount, then the collected amount simply gets adjusted against the final taxes payable.

For example, if Rs 15,000 was collected as TCS during the purchase of a vehicle, the same amount reduces the buyer’s final tax outgo at the time of return filing.

Documents required to claim TCS benefit

To claim refund or adjustment, buyers should keep these documents ready:

Form 27D issued by the dealer
PAN details
Vehicle purchase invoice
TCS payment proof
Correct bank account details linked to ITR

Form 27D acts as the official TCS certificate issued by the seller.

If PAN details are not provided, the applicable TCS rate may become significantly higher under tax rules.

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Why checking Form 26AS is important

Experts advise taxpayers to verify whether the TCS amount appears correctly in Form 26AS or AIS before filing returns. Only the amount reflected in these tax records can generally be claimed for refund or adjustment.

Once the Income Tax Return is processed successfully, eligible refunds are typically credited directly to the registered bank account within two to three months.