So you bought a new car this month. Congratulations!!! Did you pay TCS on the purchase and are wondering why? Also do you want to know if you can claim credit for it in your annual tax return? We will address all these questions in today’s blog post.
Tax Collected at Source (TCS) is the tax that seller collects from the buyer. As per Income Tax rules when the sale price of the vehicle exceeds Rs 10 lakhs, the seller needs to collect TCS on the sale. The rate of TCS on vehicle is 1%. If the buyer does not provide his/her PAN to the seller, then the applicable TCS rate will be 20%. If the buyer has not filed their income tax return in the previous two financial years, then TCS rate will be 5%. TCS is levied only on engine based vehicles.
The seller of the vehicle has to issue the TCS certificate in Form 27D. Buyers need to ensure that the seller gives them the TCS certificate within the allowable time.
Which vehicles are covered under TCS?
The income tax act mentions that TCS is applicable on purchase of vehicle exceeding Rs 10 lakhs. Now, vehicle covers any vehicle with four or more wheels, bike, scooters. This will also cover electric cars and scooters/bikes.
To which sellers is TCS applicable?
A vehicle can be sold through a dealership, pre-owned car market or can be imported from outside via a dealer. TCS applies to all the sellers, selling a vehicle exceeding Rs 10 lakhs in India. So responsibility of collecting tax would be with the seller, irrespective of whether the vehicle is new, pre-owned or imported.
An individual selling a pre-owned car exceeding Rs 10 lakhs, will have to collect TCS in the current financial year, if the individuals total sale or turnover of business exceed Rs 1 crore in the last financial year. For individual with professional income, TCS will have to be collected if gross receipts exceed Rs 50 lakhs in the last financial year.
Where an individual does not meet any of the above income criteria and is selling a pre owned car for more than Rs 10 lakhs, no TCS is required to be collected.
How to claim credit for TCS?
You can claim TCS on vehicle purchase if the seller has deducted TCS and paid it to the Government against your PAN. While filing the income tax return, you need to enter the TCS details as mentioned in Form 27D issued to you by the seller. If your taxes paid/collected exceed the total tax liability, you will get a refund. If you have a tax payable then it will be offset to the extent of TCS already collected.
