TCS refund on car purchase: Who can claim it, how it works, and key rules to know

Can you get a refund on TCS (Tax Collection at Source) on the car that you had purchased? TCS is levied if the sale value of the motor vehicle exceeds ₹10 lakh. The government levies a 1% TCS on the sale value (including GST) of the vehicle. But you can claim a refund for the entire TCS subject to certain conditions. Here is a guide on who is eligible for a TCS refund and how to claim it.

What is TCS, and is there a limit for levying it on purchases?

TCS is an additional amount collected as tax by a seller of specified goods from the buyer at the time of sale that is over and above the sale amount and is remitted to the government account. As per the Income Tax (IT) Act, 1961, certain persons, ‘being the sellers,’ must collect a specified percentage of tax at the time of receipt of an amount from their buyers or at the time of debiting the account of the buyer, whichever is earlier. Section 206C of the IT Act mentions the particulars of goods, on sale of which tax needs to be collected from the purchasers.

A 1% TCS is levied on the purchase of a motor vehicle exceeding ₹10 lakh in value. TCS is exempt when the eligible goods are used for personal consumption and when the purchaser buys the goods for manufacturing, processing, or production and not for trading those goods. The TCS applies to both domestic and imported vehicles.

“However, no collection of tax (TCS) shall be made in case of buyer, who is resident of India, if such buyer furnishes to the collector (seller) the declaration in writing to the effect that the goods are to be utilized for manufacturing, processing or producing article or things (all for generation of power) and not for trading purpose. One copy of such a declaration is required to be submitted to the Chief Commissioner of Income-tax or the Commissioner of Income Tax,” according to the IT Department.

How and when can you claim the TCS refund?

Buyers can claim a TCS refund when they file their annual IT Return (ITR) for the financial year in which the car was purchased. While filing your ITR, mention the TCS amount under the section ‘TCS’ as it will be the amount that will be credited against your total tax liability for the year.

Before filing your ITR, you have to keep all the relevant documents ready. These include ‘Form 27D’, a certificate that is provided by the seller, PAN card details, documents showing the collected TCS amount, and the collection date. Make sure that your bank details in the ITR are accurate, as it will help you get the refund directly into your account without any hassles.

“The ‘Collector of TCS’ has to provide a TCS certificate in ‘Form 27D’ to the purchaser of the goods,” according to the IT Department. So, you have to get ‘Form 27D’ from the dealer who sold you the car. If you do not have Form 27D, you can download it from the TRACES (TDS Reconciliation Analysis and Correction Enabling System) portal of the IT Department. The due dates for the issue of TCS certificates are as under

‘Form 26AS’ is the consolidated tax statement that shows all taxes paid, including your TCS. You have to verify your TCS in ‘Form 26AS’. For this, you have to log in to the IT ‘e-filing portal’, navigate to ‘e-file’ ‘Income Tax Return’ ‘Form 26AS’. You have to check whether TCS is correctly reflected in ‘Form 26AS’. This is crucial as you can claim a refund for only the TCS amount that is reflected in ‘Form 26AS’.

What is the eligibility for the TCS refund?

The eligibility for claiming the TCS refund entirely depends on the income tax liability of the buyer. If the buyer’s income is below the taxable annual limit and she/he do not pay any income tax, the entire TCS paid will be refunded. The buyer will also get a refund if the TCS she/he has paid is more than the annual tax that she/he has to pay for the year.

But if the income is above the annual taxable limit and the TCS paid is less than the total tax payable for the year, the TCS paid will be set off against the buyer’s annual tax liability. The IT Department typically processes refunds in 2-3 months. The refund amount is directly credited to the registered bank account.

Allirajan M is a journalist with over two decades of experience. He has worked with several leading media organisations in the country and has been writing on mutual funds for nearly 16 years.