You might not even realise but you might be losing out on your own money if you recently purchased a car. Every buyer pays full attention when it comes to securing the loan for their dream car, but what many are unaware of is that dealers collect a 1% TCS on the sale if the vehicle’s cost is above a specified limit .
And this money can be claimed as refund or adjusted against your total tax liability when filing the income tax return (ITR) for the relevant year.
Just how your employer deducts TDS from your salary (if you have a tax liability or you are employed as a consultant), car dealers are required to deduct a 1% TCS (tax collected at source) when the ex-showroom price of the vehicle goes over Rs 10,00,000. Most buyers would unknowingly include it as payment towards the car, but TCS is an additional amount which the seller of specified goods needs to collect at the time of sale and remit to the government account.
According to the income tax rules, car dealers are required to deduct 1% TCS if the ex-showroom value of the car exceeds Rs 10 lakh. However, do not confuse your total car cost with ex-showroom price, which is the base retail cost excluding any taxes, accessory charges etc.
Are you losing out on a Rs 10,000 minimum tax refund?
If you don’t have any income tax liability, then this TCS collected on the car purchase can be claimed as tax refund while filing the ITR. If you have any tax liability, then this TCS amount can be adjusted againstit, and you will need to pay the net amount.
In most cases, buyers view TCS as part of the vehicle purchase cost rather than as a tax credit available against their PAN, explains Deepashree Shetty, Partner, Global Mobility Services, Tax & Regulatory Advisory at BDO India.
| Car price (ex-showroom cost) | Approx TCS deducted (1%) |
| Rs 10,00,000 | Rs 10,000 |
| Rs 15,00,000 | Rs 15,000 |
| Rs 20,00,000 | Rs 20,000 |
TCS should not be misconstrued as a permanent outgo. Instead, it is a tax credit against the buyer’s PAN, which can be claimed when filing the tax return for the financial year in which the car was bought.
Since the amount is collected by the dealer and not paid directly through the income-tax return process, many taxpayers overlook it while preparing their ITR, Shetty adds.
TCS on car purchase: Does it apply to your vehicle?
“When purchasing a vehicle costing over Rs 10 lakh for personal or business use, please be aware that Tax Collected at Source (TCS) applies under the Income-tax Act. While this is not an additional tax, it serves as a credit against your total tax liability,” Suneel Dasari, Founder and CEO, EZTax, tells ET Wealth Online.
Don’t think that TCS would apply only luxury items or high-end cars. Section 206C(1F) of the Income Tax Act, 1961 says that "every person, being a seller, who receives any amount as consideration for sale of a motor vehicle of the value exceeding Rs 10 lakh, shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 1% of the sale consideration as income tax."
So, if you purchased any mid-size SUV, premium MPV, electric vehicle, full-size SUV or any other motor vehicle, the value of which exceeds Rs 10 lakh, chances are that your dealer would have deducted 1% TCS, and you might not have paid attention to it.
Where can you check the 1% TCS amount deducted?
While the amount should eventually be reflected against your PAN, it is also reflected in Form 26AS and AIS statements.
“Once the dealer deposits the TCS and reports it correctly against the buyer's PAN, the credit should reflect in Form 26AS and AIS statements automatically. Nevertheless, taxpayers should verify the credit before filing their return, as reporting or PAN-mapping errors can delay reflection in the statements,” Shetty tells ET Wealth Online.
Checking these forms is anyways a good practice so you are aware of tax liability, and refund, if any.
| How to check if 1% TCS has been deducted | |
| Form 26AS | Offers you a consolidated view of all the taxes that you or others have paid by deducting from you and depositing on your behalf, during the FY. |
| Annual Information Statement (AIS) | It provides complete information about a taxpayer for the FY, and contains information about taxpayers' incomes, financial transactions, tax details, etc. |
What if you can’t see TCS deducted by car seller in Form 26AS?
If the credit is missing, the taxpayer should first approach the dealer to verify deposit and correction of TCS returns, as a mismatch may trigger a query from the tax department.
Shetty points out that as a matter of prudence, credit should ideally be claimed only when it is reflected in Form 26AS/AIS or supported by the seller's reporting.
What is the process of claiming TCS deducted on car purchase; which forms are required?
Dasari shares that buyers must ensure that they provide their correct PAN to the dealer at the time of purchase. “The TCS will appear in your Form 26AS/AIS once the dealer deposits the tax and files their return. We recommend claiming the credit only after it is reflected in these documents,” he adds.
If it is missing, you should contact your dealer to verify their filing.
Moreover, to get the TCS refund, the individual must also get Form 27D (TCS certificate) issued by their dealer and verify the credit in Form 26AS to claim the TCS amount against the overall tax liability while filing the tax return.
What to keep in mind when claiming TCS refund in ITR?
From a compliance perspective, taxpayers should check Form 26AS/AIS before the applicable ITR filing due date. Key point is that TCS can be claimed only in the year in which the transaction is reported and the credit becomes available against the taxpayer's PAN.
TCS must be claimed by filing your Income Tax Return (ITR) for the relevant financial year. The standard filing deadline is July 31, says Dasari.
| How to claim TCS credit in ITR |
| Check TCS credit in Form 26AS/AIS |
| File ITR for the same financial year |
| Enter the TCS amount under ‘Taxes Paid’ |
| It would get auto adjusted in the system |
Can you claim TCS credit for car purchased 2 or 3 years ago?
What if someone had purchased a car in the financial year 2024-25 but forgot to claim TCS credit while filing their income tax return for that FY? Can they claim it now (while filing ITR for FY 2025-26)?
Shetty explains that TCS credit pertains to the year in which it was collected and reflected and therefore cannot simply be shifted to a subsequent year's return. However, taxpayers can still do so by revising or updating the income tax return for the relevant year, subject to statutory timelines and eligibility, so that the missed TCS credit can be claimed in the correct tax year.
| Common mistakes to avoid |
| Ensure correct PAN details |
| Collect Form 27D from dealer |
| Check Form 26AS/AIS thoroughly |
| Claim TCS while filing ITR for the relevant year |
While underlining that TCS credit should be claimed in the year it was collected, Dasari says if someone missed claiming it in the previous year, they must revise the original return or seek rectification rather than carrying it forward to a subsequent year.
Will you get a full TCS refund for car if claimed in ITR?
No. The taxpayer would only get the TCS refund if the amount is more than their total tax liability or if they do not have a liability at all. In case, their TCS amount is less than what they owe as tax, the amount will get adjusted.
For example, if you bought a car which costs Rs 18 lakh ex-showroom, the TCS deducted would be Rs 18,000 (1% of Rs 18 lakh). If your tax liability for the financial year is Rs 8,000, the Rs 18,000 TCS amount will get adjusted towards the same and the refund you will get will be Rs 10,000.
