Bengaluru: Purchasing a car worth more than Rs 10 lakh does not only increase expenses such as EMIs, insurance premiums, and registration charges. It may also involve a tax component that many buyers either overlook or fail to claim while filing their income tax returns.

Under the Income Tax Act, customers purchasing cars priced above Rs 10 lakh are required to pay 1 per cent Tax Collected at Source (TCS), which is collected by the dealer and deposited with the government against the buyer’s Permanent Account Number (PAN).

Tax experts say several vehicle buyers either do not notice the TCS amount mentioned in their invoice or fail to verify whether the amount has been properly reflected in their tax records. As a result, many taxpayers may unknowingly miss a valid tax credit that could reduce their overall tax liability or increase their income tax refund.

What is TCS on car purchases?

Under Section 206C(1F) of the Income Tax Act, automobile dealers must collect 1 per cent TCS on the sale of motor vehicles priced above Rs 10 lakh.

The amount is collected from the buyer during the purchase process and later deposited with the Income Tax Department using the buyer’s PAN details.

For example, if a customer purchases a vehicle worth Rs 15 lakh, the dealer is required to collect Rs 15,000 as TCS in addition to the vehicle cost.

The provision applies only when the ex-showroom price of the vehicle exceeds Rs 10 lakh.

TCS is a tax credit, not a separate refund

Many buyers mistakenly assume that the TCS amount is a non-refundable charge or an additional tax burden. However, tax professionals clarify that TCS functions similarly to Tax Deducted at Source (TDS).

The collected amount is treated as a tax credit against the buyer’s final income tax liability.

This means that while filing Income Tax Returns (ITR), the TCS amount gets adjusted along with other taxes already paid, such as TDS and advance tax.

If the total taxes already paid exceed the taxpayer’s actual tax liability, the excess amount may be refunded by the Income Tax Department. If the tax liability is higher, the TCS amount is adjusted against the remaining dues.

Where taxpayers can verify the amount

The TCS collected during vehicle purchase generally appears in the taxpayer’s records through:

  • Form 26AS
  • Annual Information Statement (AIS)

Since the amount is linked directly to the buyer’s PAN, taxpayers can verify whether the dealer has correctly deposited the TCS with the government.

Tax experts advise vehicle owners to regularly review these records before filing their income tax returns to avoid missing eligible credits.

Why many buyers fail to claim it

According to tax consultants, a large number of car buyers remain unaware that the TCS paid during vehicle purchase can later be adjusted while filing ITR.

Several common reasons contribute to taxpayers missing the benefit:

  • Failure to check Form 26AS or AIS
  • Incorrect PAN details provided during purchase
  • Lack of awareness regarding TCS adjustment
  • Forgetting to verify tax credits while filing returns

In some cases, individuals who are not regular income tax filers may not realise that filing returns becomes necessary if they wish to claim excess taxes paid.

Experts say such oversights are more common among first-time luxury or premium vehicle buyers.

Steps car buyers should follow

Tax professionals recommend that individuals who purchase vehicles priced above Rs 10 lakh should take a few important precautions to ensure the TCS credit is not missed.

Buyers should:

  • Preserve the purchase invoice carefully
  • Ensure the correct PAN number is provided to the dealer
  • Verify Form 26AS and AIS before filing ITR
  • Check whether the TCS amount is accurately reflected in tax records

If the dealer has deposited the amount correctly, the TCS credit generally appears automatically under taxes already paid while filing income tax returns.

Awareness can help reduce tax burden

Financial experts believe better awareness about TCS provisions can help taxpayers avoid unnecessary financial losses and claim legitimate tax credits on high-value purchases.

With luxury and premium car sales increasing steadily across India, tax professionals expect greater attention towards proper reporting and reconciliation of TCS entries in coming years.

Experts also advise taxpayers to consult chartered accountants or tax professionals if discrepancies are found in Form 26AS or AIS regarding vehicle purchase-related TCS entries.

Proper verification and timely filing of returns can help buyers ensure that the tax already paid during vehicle purchase is fully accounted for and adjusted correctly.