The sale of motor vehicles above a specified value attracts Tax Collected at Source (TCS) under Section 206C(1F) of the Income Tax Act, 1961. According to reports from Mint, car dealers or sellers must collect TCS from buyers when the sale consideration of a motor vehicle exceeds ₹10 lakh. The applicable TCS rate is 1% of the sale value, meaning for a car purchased for ₹12 lakh, the dealer will collect ₹12,000 as TCS. However, certain buyers are exempt from this provision, including the Central Government, State Governments, embassies, high commissions, local authorities covered under Section 10(20) of the Income Tax Act, and public sector entities engaged in passenger transport services.
A buyer can claim credit for the TCS paid while filing the Income Tax Return (ITR). As reported by Mint, the amount collected is reflected against the buyer's PAN and can either reduce the tax liability or be refunded if excess tax has been paid. The refund process involves collecting Form 27D issued by the seller, verifying TCS details in Form 26AS with Form 27D, assessing tax liability, filing the ITR, and confirming refund status through the Income Tax e-filing portal. Taxpayers may be eligible for a refund if annual income is below the taxable limit, total tax liability is lower than the TCS amount, or if total tax liability exceeds the TCS collected.
Section 206C(1F) is applicable only to retail buyers, with transactions involving manufacturers and automobile dealers outside its scope. According to Mint, the tax is collected at the earlier of two events: when the buyer's account is debited or when the seller receives payment. The primary objective is to help tax authorities monitor high-value transactions, curb tax evasion, and improve financial transparency. Buyers should monitor Form 26AS regularly, file ITR on time, and seek professional guidance if required to ensure smooth refund processing.
Taxpayers can track the status of their TCS refund through the Income Tax Department's e-filing portal by visiting the portal, logging in using PAN, user ID, and password, navigating to e-File > Income Tax Returns > View Filed Returns, and checking whether the refund has been processed, partially issued, or adjusted against outstanding tax demands. As reported by Mint, this tracking facility helps ensure refunds are processed efficiently and taxpayers can monitor the status of their claims.
