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Luxury Cars Above ₹10 Lakh Now Attract 1% Tax Collected at Source (TCS)

Written by Ananya Desai

Understanding the Tax on High-Value Vehicle Purchases

Planning to buy that dream luxury car costing more than ten lakh rupees? Be prepared for an additional 1% charge at the time of purchase. This isn't a new tax adding to the overall cost permanently, but rather a mechanism called Tax Collected at Source (TCS), designed to track high-value transactions and ensure tax compliance. Let's break down what this means for buyers and sellers in India.

This specific rule falls under Section 206C(1F) of the Income Tax Act, 1961. It mandates that any seller receiving consideration for the sale of a motor vehicle valued exceeding ₹10 lakh must collect an additional 1% of the sale consideration from the buyer as TCS.

How Does TCS on Luxury Cars Work?

When you purchase a car with a sale value (including VAT/GST, etc., as applicable on the vehicle itself, but generally excluding RTO charges, insurance if billed separately) above ₹10 lakh, the seller (the car dealership) is legally obligated to collect this 1% TCS from you, the buyer, over and above the car's price.

For instance, if you buy a car priced at ₹15 lakh, the seller will collect an additional ₹15,000 (1% of ₹15 lakh) as TCS. This collected amount is then deposited by the seller with the government.

It's crucial to note that this TCS applies regardless of whether the payment is made in cash, cheque, online transfer, or any other mode. The trigger is the sale consideration exceeding the ₹10 lakh threshold for a single vehicle.

Is TCS an Extra Tax Burden? Not Exactly.

While it might seem like an added cost initially, the amount collected as TCS is not an additional tax expense for the buyer in the long run, provided they file their income tax returns.

The TCS amount collected can be claimed as a credit against your total income tax liability for the financial year. Think of it as an advance tax payment made on your behalf by the seller. When you file your Income Tax Return (ITR), this TCS amount will reflect in your Form 26AS (Annual Tax Statement). You can then adjust this amount against your final tax dues. If the TCS paid exceeds your tax liability, you can even claim a refund.

For accurate tracking and credit, providing your Permanent Account Number (PAN) to the seller is essential. If a buyer fails to furnish their PAN, the TCS rate jumps significantly from 1% to 5%, as per Section 206CC of the Income Tax Act.

Why This Rule? Government's Objective

The primary goal behind implementing TCS on high-value transactions like the purchase of expensive cars is to bring such dealings into the tax net more effectively. It helps the Income Tax Department track large expenditures and correlate them with the income declared by taxpayers.

By ensuring that tax is collected at the source of the transaction itself, the government aims to curb tax evasion and widen the tax base, ensuring that individuals making significant purchases are also contributing appropriately to the national exchequer.

While Section 206C(1F) specifically targets motor vehicles above ₹10 lakh, it's worth remembering that other TCS provisions exist, such as Section 206C(1H) which applies 0.1% TCS on the sale of *any* goods (other than those covered by specific sections like cars or overseas tour packages) if the seller's turnover exceeds ₹10 crore in the preceding financial year and the aggregate value of purchases by a single buyer exceeds ₹50 lakh in the current financial year.

Staying informed about these regulations helps in financial planning. For more updates on government regulations and financial news, keep visiting relevant portals. For more updates, visit https://asarkari.com.

Conclusion: Plan Ahead for High-Value Buys

The 1% TCS on motor vehicles exceeding ₹10 lakh is a compliance measure rather than a new tax burden. Buyers should factor this initial collection into their budget but remember that it's adjustable against their income tax liability. Ensuring your PAN details are correctly provided to the seller is crucial to avoid a higher TCS rate and to facilitate claiming the credit smoothly during tax filing.

kam sabdo me kahein to: Buying a car above ₹10 lakh requires the seller to collect an extra 1% as Tax Collected at Source (TCS), which the buyer can later claim as credit while filing their income tax return.

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