TCS on Car Purchase - How to Claim TCS Refund on Car Purchase?

Are you planning a car purchase? If yes, you should know about TCS and how to claim a TCS refund on a car purchase. Tax Collected at Source (TCS) on Car Purchase comes under Section 206C(1F) of the Income Tax Act, 1961. Before we dig deeper into Section 206C(1F), we will try to understand TCS on car purchase. 

What is Tax Collected at Source (TCS)

Tax Collected At Source (TCS) under section 206C is a tax the seller collects from the buyer at the time of sale. It is a certain percentage of the purchase amount that a seller collects from the buyer based on the sale consideration. TCS is collected when the buyer’s account is debited by the amount liable to be paid or when the seller receives such amount from the buyer in cash, draft, cheque, or any other mode of payment, whichever is earlier.

The buyer is required to submit the TCS to the government within the stipulated time. TCS helps the government track high-value transactions, prevent money laundering and international fund transfers, and combat tax evasion.

Let's understand how TCS (Tax Collected At Source) works on car purchases.

TCS on Car Purchase

TCS on Car Purchase comes under section 206C(1F), which applies to Tax Collected at Source on motor vehicles. Under this section, the seller or car dealer must collect the tax at a specified rate on the sale consideration from the buyer. The rate of TCS is 1% if the sale consideration exceeds Rs. 10 lakh.

However, section 206C(1F) does not apply to the buyer if the buyer is the central government, State government, embassy, high commission, a public sector company engaged in the business of passengers, or a local authority as per section 10(20) of the Income Tax Act.

Also, Section 206(1F) applies only to retail sales, it does not apply to car manufacturers or dealers.

How to Claim a Refund of TCS on Car Purchase?

Buyers can claim a TCS refund while filing their ITR. They need to keep a record of Form 27D, a certificate provided by the seller. The steps involved in the process of claiming TCS refunds are as follows:

Step 1: Before filing your ITR, gather all the certificates issued by the entities where your TCS is deducted. These include Form 27D, PAN details, the collected TCS amount, and the collection date. If you don’t have Form 27D, you can download it from the TRACES portal or request it from the car seller.

Step 2: Log in to the Income Tax portal and verify the details in Form 26AS as reflected in Form 27D.

Step 3: Calculate your tax liability. If the total tax liability for the financial year is more than the TCS amount paid to the government by the seller for the car purchased, then the TCS amount will be offset against the total tax liability and If the total tax liability is less than the TCS amount paid to the government, then you are eligible to receive a refund of the TCS amount in your PAN-linked bank account.

Step 4: File the ITR for the year the car is purchased. 

Step 5: Review the tax summary to verify the amount of TCS refund for the car purchased.

How to Check Refund Status On Car Purchase

Step 1: Visit the e-filing portal of Income Tax

Step 2: Log in with your User ID and password

Step 3: If your PAN is not linked with Aadhar, a pop-up will appear showing that your PAN is inactive

Step 4: Click on the Link Now button to link your PAN with Aadhar, or select continue if you don’t want to link

Step 5: Go to e-file tab>>Select Income Tax Returns>> Click View Filed Returns. 

Here you can check the refund status of the desired assessment year as the refund has been issued, the refund has been issued but it is partial or, the department has adjusted the total return.

Eligibility for TCS Refund

• If your income is below the taxable annual limit, you are not liable to pay income tax. In this case, the Income Tax Department will refund your TCS paid
• If your income is above the taxable annual limit and the TCS paid is more than the total tax payable, TCS will be refunded to the assessee's bank account.
• If your income is above the taxable annual limit and the TCS paid is less than the total tax payable, the TCS paid will be adjusted to the total tax liability.

How Can You Make the Process of TCS Refund Smoother?

You can receive a refund of TCS on the car purchased in a hassle-free manner by following the steps below:

• Regular check on Form 26AS: You should monitor Form 26AS to ensure that the TCS credit reflected is similar to the amount collected by the car seller.
• Timely Filing of ITR: Avoid delaying filing the ITR as it delays the refund process and also attracts a penalty and late fees.
• Consult Professional: If you find the process of ITR filing confusing, you can consult a tax professional who can guide you through the refund process.