Car buyers in India often pay an additional 1% Tax Collected at Source (TCS) when purchasing a new vehicle priced over ₹10 lakh. This amount is not an extra tax but an advance payment towards your income tax. Understanding how to claim this refund or adjust it against your tax liability is crucial for managing your finances. ### Understanding TCS on Car Purchases Tax Collected at Source (TCS) is a system where the seller collects a specified percentage of tax from the buyer at the time of sale for certain goods and then deposits it with the government. For motor vehicles, this provision falls under Section 206C(1F) of the Income Tax Act, 1961. The^{[1][2][3][4][5][6][7][8]} car dealer or seller must collect 1% of the sale consideration as TCS if the vehicle's value exceeds ₹10 lakh. This ^{[1][2][3][4][5][9][10]}collection happens when the seller receives the payment or debits the buyer's account, whichever comes first. The ^{[1][2][3][9][7][8]}government implemented TCS on high-value transactions like car purchases to track luxury spending and ensure tax compliance. It he^[1][4]lps tax authorities monitor significant transactions and discourages unaccounted dealings. This ^{[4][5][9][10]}1% TCS applies to the car's sale value, including the Goods and Services Tax (GST). ### ^[2][10]Who Can Claim the TCS Refund? Not all car buyers who pay TCS are eligible for a refund. Eligibility primarily depends on your overall income tax liability for the financial year. You c^[2][5][10]an claim a full refund if your annual income falls below the taxable limit, meaning you are not liable to pay income tax. Buye^{[1][2][5][10]}rs are also eligible for a refund if the total TCS paid is more than their annual tax payable. In th^{[1][2][5][10]}is situation, the excess TCS amount will be refunded to your bank account linked with your Permanent Account Number (PAN). If your income is above the taxable limit but the TCS paid is less than your total tax liability, the TCS amount will be adjusted against your overall tax dues. Non-R^[1][2]esident Indians (NRIs) who buy cars in India can also claim a TCS refund by following the same procedure as resident buyers. ### ^[5]Key Rules and Exceptions The ₹10 lakh threshold for TCS applies to both new and used motor vehicles when purchased from a registered dealer. "Sectio^[11][10]n 206(1F) of the Income Tax Act does not distinguish between new and used vehicles," said chartered accountant Sandeep Agrawal, Co-founder at Teamlease Regtech. "This means that TCS will be applicable on buying of motor vehicle if its value exceeds Rs 10 lakh." Howeve^[11]r, certain buyers and situations are exempt from TCS. The central government, state government, embassies, high commissions, public sector companies involved in passenger transport, and local authorities do not have to pay TCS. Additio^[1][7]nally, TCS is generally not applicable if you buy a used car from an individual seller. The la^[5][11]w also clarifies that TCS does not apply when car manufacturers sell vehicles to dealers or distributors for resale. This is^[1][8][12] because the transaction is for trading purposes, not final consumption. "An individual with no business or professional income or business or professional income below the threshold limits will not be required to collect TCS if they are selling second hand motor vehicles above Rs 10 lakh value," said chartered accountant Abhinit Singh, founder, Ready Accountant. Furthe^[11]rmore, electric vehicles (EVs) with four wheels or less, and an engine's cubic capacity (CC) equal to or more than 25CC, are subject to TCS if their value exceeds ₹10 lakh. However, ^[11]high-end cycles are not covered as the Income-tax Act levies TCS only on engine-based vehicles. "Even ele^[11]ctric vehicles (EVs) with four wheels or less, having engine's CC equal to or more than 25CC, would be subject to TCS provided the value of such vehicles exceeds Rs 10 lakh," said Sandeep Jhunjhunwala, Partner, Nangia Andersen LLP. ### How ^[11]to Claim Your Refund Claiming your TCS refund involves a few straightforward steps, primarily during your annual Income Tax Return (ITR) filing. First, gather all necessary documents. You will need Form 27D, a certificate provided by the car seller detailing the TCS amount collected, the date of collection, and your PAN details. If you do^{[1][2][3][5][9]} not receive Form 27D, you can request it from the seller or download it from the TRACES portal. Next, ve^[1]rify the TCS details in your Form 26AS. This consolidated tax statement is available on the Income Tax e-filing portal. Log in with your User ID and password, then navigate to the 'e-file' section, select 'Income Tax Return,' and then 'Form 26AS.' It is cri^[2][3]tical to ensure that the TCS amount reflected in Form 26AS matches the amount mentioned in your Form 27D, as you can only claim a refund for the amount shown in Form 26AS. After ve^[2][9]rifying your TCS details, calculate your total income tax liability for the financial year. This step^[1][3] helps determine if you are eligible for a full refund, a partial refund, or if the TCS will simply adjust against your tax dues. Finally,^[1][2] file your Income Tax Return for the financial year in which you purchased the car. In the IT^{[1][2][3][13][5][9][10]}R form, typically under the section for 'Taxes Paid and Verification' or 'Schedule TCS,' mention the collected TCS amount. The system will automatically credit this amount against your total tax liability. If the TC^[2][3]S paid exceeds your final tax liability, the Income Tax Department will process the refund. The Inco^[1][2]me Tax Department usually processes refunds within 2-3 months after you file your ITR. Some sour^[2]ces suggest it can take up to 12 months. To ensure^[13][5] a smooth and timely refund, make sure your bank details linked to your PAN are accurate in your ITR. Delaying ^[2]your ITR filing can also delay your refund and may lead to penalties. If the pr^[1]ocess seems confusing, consulting a tax professional can provide helpful guidance. META_TIT^[1]LE: Claim 1% TCS Refund on Car Purchases Over ₹10 Lakh

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