Buying a Car Over ₹10 Lakh? Don’t Miss This About TCS On Cars
When you buy a new car, you might see something on your bill called TCS, which stands for Tax Collected at Source. Don’t worry, it’s not a new or extra tax! Think of it as a small advance payment on your income tax. The car dealer collects this money from you when you buy the car, and then they pay it to the government. Understanding TCS on cars is crucial for anyone making a high-value purchase.
When Do You Pay TCS on Cars?
You only have to pay TCS if the price of your new car is more than ₹10 lakh. The amount you pay is always 1% of the car’s ex-showroom price. So, if a car costs ₹15 lakh, you pay ₹15,000 as TCS. The rules for TCS on cars are governed by Section 206C(1F) of the Income Tax Act, 1961.
For more details on the legal provisions, you can visit the official Income Tax India website.
Your Money, Your Tax
The car dealer gives you a special form, called Form 27D, as proof that you paid TCS. When you file your tax return (your ITR), the money you paid as TCS will be shown there. The government then uses that money to pay part of your tax for the year. If you paid too much in tax, you will get the extra money back as a refund. This process makes it easy to claim your TCS on cars as a tax credit.
Why is TCS Collected?
TCS is a mechanism used by the government to track high-value transactions and ensure that individuals contribute to tax revenue at the point of certain purchases. While it’s an upfront payment, it ultimately helps simplify your tax filing process by acting as a pre-paid portion of your tax. This system helps the government curb tax evasion and maintain a transparent record of large purchases.
How to Claim Your TCS Refund
Claiming your refund is a straightforward process. You must have Form 27D from the dealer and ensure the amount is reflected in your Form 26AS. When filing your Income Tax Return, you can claim the amount under the relevant head. If your total tax liability is less than the combined amount of TDS and TCS on cars paid, you will receive a refund for the excess amount.
To understand how this refund process works with your overall tax filing, you can read our guide on how to file your ITR online.
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