Purchasing a car priced at ₹10 lakh or more in India entails a legal requirement under Section 206C(1F) of the Income Tax Act, 1961, i.e., the seller (usually the dealer) must collect Tax Collected at Source (TCS) at a rate of 1% of the sale value. While this increases your initial cost, the amount paid as TCS is not lost; it is deducted from your total tax liability. You can claim it as a refund or adjust it against your final tax liability while filing your Income Tax Return (ITR).
This blog explains everything you need to know about how to claim your TCS refund for car purchases during the Financial Year 2024-25 (Assessment Year 2025-26).
What is TCS (Tax Collected at Source)?
Tax Collected at Source (TCS) is a type of direct tax that a seller collects from the buyer at the time of sale of certain specified goods or while providing specific services. The seller then deposits this tax with the government on behalf of the buyer. It is governed by Section 206C of the Income Tax Act, 1961.
TCS is applicable in specific cases, such as:
- Sale of motor vehicles above ₹10 lakh (under Section 206C(1F))
- Sale of scrap, liquor, minerals like coal or iron ore
- Sale of forest produce like timber
- Overseas tour packages or foreign remittances above prescribed limits (under Section 206C(1G))
What is TCS on Car Purchases?
Under Section 206C(1F) of the Income Tax Act, 1961, TCS applies when:
- The value of the car (ex-showroom price) is ₹10 lakh or more.
- The applicable rate is 1% of the car’s price.
Example:
If the ex-showroom price of your vehicle is ₹14,00,000, then TCS = ₹14,000 (1% of ₹14,00,000).
This amount is collected by the car dealer and deposited with the Income Tax Department under the buyer’s PAN.
Who is Responsible for Collecting and Paying TCS?
Who Collects TCS?
- The car dealer (or seller), if the sale value crosses ₹10 lakh.
- TCS is collected at the time of invoice generation or receiving payment, whichever is earlier.
Who Pays TCS?
- Any individual, business, or company purchasing a vehicle above ₹10 lakh.
- TCS is paid by the buyer to the dealer, who then remits it to the tax authorities.
Once collected, the amount should reflect in the buyer’s tax credit record (Form 26AS/AIS) against their PAN.
When and How is TCS Deposited?
- The dealer collects TCS at the point of billing or payment.
- It must be deposited by the dealer with the Income Tax Department by the 7th of the following month.
- After deposition, it is recorded under your PAN in Form 26AS and the AIS (Annual Information Statement).
How to Verify TCS Credit in Form 26AS?
Before claiming the TCS refund, confirm that the dealer has deposited the amount under your PAN. To check:
Step 1: Go to the Income Tax Portal at https://www.incometax.gov.in
Step 2: Log in using your PAN, password, and captcha.
Step 3: Navigate to ‘e-File’ > ‘Income Tax Returns’ > ‘View Form 26AS’.
Step 4: In Form 26AS, go to ‘Part F – Details of Tax Collected at Source’.
Ensure the entry includes the dealer’s TAN, the amount, and the transaction date.
If no entry is visible, contact the car dealer immediately to resolve the issue.
Who Can Claim the TCS Refund?
You are eligible to claim a TCS refund if:
- You are an individual or entity who purchased a vehicle costing ₹10 lakh or more.
- The dealer correctly deposited the TCS under your PAN.
- Your total tax liability is lower than the combined amount of TDS and TCS paid.
Step-by-Step Process to Claim the TCS Refund
Step 1: Collect Necessary Documents
- Form 27D: This is a TCS certificate issued by the dealer who sold the vehicle. It includes the amount of tax collected, the date of collection, and the dealer’s TAN.
- PAN card details of the dealer
- TCS amount collected by the seller
- Date of purchase and tax collection
If Form 27D has not been shared with you, you can either:
- Download it directly from the TRACES portal, or
- Request it from the car dealership.
Step 2: Verify TCS Details in Form 26AS
Log in to the official Income Tax e-filing portal at https://www.incometax.gov.in using your PAN as the user ID. Navigate to ‘View Form 26AS’ and confirm that the TCS details from Form 27D are correctly reflected.
Make sure that the following are correct:
- Dealer’s TAN
- Date and amount of TCS collected
- Transaction type and your PAN
If there is any discrepancy, contact the dealer to correct the TCS filing.
Step 3: Calculate Your Tax Liability
Determine your total income tax liability for the financial year. The TCS amount collected by the car dealer is treated in the same manner as advance tax or TDS.
There are two possible outcomes:
- If your tax liability is more than the TCS collected, the TCS will be adjusted against the payable tax, and you will pay the difference.
- If your liability is less than the TCS, the excess amount will be refunded directly to your PAN-linked bank account after filing your return.
Step 4: File Your Income Tax Return
Proceed to file your ITR for the financial year in which the car was purchased. For example, if the vehicle was bought in FY 2024–25, then file ITR for Assessment Year 2025–26.
While filing the Income Tax Return
- Choose the appropriate ITR form (usually ITR-1 or ITR-2 for individuals).
- In the section titled “Taxes Paid and Verification” or “Schedule TCS”, confirm or enter the TCS amount and dealer’s details if not auto-populated.
- Verify that the amount of TCS collected is correctly reflected.
Step 5: Review Tax Summary and Confirm Refund Amount
After entering all income and tax-related details, review the summary provided before submission. The summary will show your:
- Total tax liability
- TDS and TCS paid
- Any balance tax to be paid
- Refund due, if applicable
Submit your ITR and ensure you e-verify it through Aadhaar OTP, net banking, or any other available method.
How to Check the Status of Your TCS Refund (Car Purchase)
After you have successfully filed and e-verified your ITR, you can track the refund status online. Here’s how:
Step 1: Go to https://www.incometax.gov.in
Step 2: Log in to Your Account by using your PAN (as the user ID) and password
Step 3: Check PAN-Aadhaar Link Status
If your PAN is not linked with Aadhaar, you may see a notification saying your PAN is inactive. You will be given two options:
- Click ‘Link Now’ to complete the linking process.
- Or click ‘Continue’ to proceed without linking. However, note that your refund may be delayed if the PAN is not active.
Step 4: View Filed Returns
After logging in:
- Go to the ‘e-File’ menu
- Select ‘Income Tax Returns’
- Click ‘View Filed Returns’
Here, you will see a list of all returns you have filed.
Step 5: Track Refund Status
For the relevant assessment year, check the refund status under the return. The portal will show:
- Refund issued (complete)
- Refund issued (partially)
- Refund adjusted against outstanding demand
- Or, the Refund has not been processed yet
If your refund has been processed, you will see the date and mode of refund (usually NEFT or ECS to your bank account).
Essential Points to Keep in Mind
- Make sure that your PAN Card and Aadhar Card are properly linked.
- Make sure the dealer has deposited the TCS with the Income Tax Department and that it reflects in your Form 26AS.
- Always file your ITR for the correct assessment year.
- Do not forget to e-verify your return, as it is mandatory for the return to be processed.
- Keep all documents, including the invoice, Form 27D, and bank statements, in case of future verification or audit.
- The refund is generally credited within 2 to 8 weeks from the date of e-verification, depending on your return.
Illustration
Mr. Ramesh buys a car worth ₹12,50,000 in November 2024.
- TCS collected by dealer = ₹12,500
- TDS from salary = ₹13,000
- Tax liability as per ITR = ₹20,000
Calculation:
Total tax paid = ₹13,000 (TDS) + ₹12,500 (TCS) = ₹25,500
Tax liability = ₹20,000
Refund = ₹5,500
After filing ITR and e-verifying, Mr. Ramesh receives ₹5,500 back in his bank account.
Conclusion
Buying a car over ₹10 lakh means paying 1% extra as TCS at the time of purchase. But this is not a sunk cost. As long as the TCS is deposited correctly in your PAN, it can be claimed as a refund or adjusted against your tax liability during ITR filing. Ensure that your documents are accurate and that you have reviewed your tax credit statement. Filing your return correctly can help you recover this amount smoothly.
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