TCS on a car above Rs 10 lakh — citizen guide 2026

Tax Collected at Source on a high-value vehicle is not an extra registration charge retained by the dealer. From 1 April 2026, the operative provision is section 394 of the Income-tax Act, 2025; section 206C(1F) is the familiar predecessor reflected in this page's long-standing address. Verify the credit before claiming it.

Section 394(1), Table serial 6, of the Income-tax Act, 2025 covers motor-vehicle sale consideration exceeding Rs 10 lakh at 1%. The official 2026 TCS guide treats this as seller collection and identifies a motor-vehicle dealer or distributor among excluded buyers. The former provision was section 206C(1F).

The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026. The current collection rule is in section 394(1), Table serial 6. It states that sale consideration exceeding Rs 10 lakh for a motor vehicle is subject to TCS by the seller at 1%. The official transition guidance says the TDS/TCS framework continues under the new Act, with renumbered and streamlined provisions.

For a collection belonging to the earlier law period, section 206C(1F) and CBDT Circular No. 22 of 2016 remain part of the historical record. Do not put an August 2026 purchase into a form or dispute using only the old section number. Identify the transaction date and tax year, then use the provision and reporting form applicable to that period.

The dealer is the collector, the buyer is the person on whose behalf tax is collected, and the government records the amount against the buyer's tax identity. Section 390(5) of the Income-tax Act, 2025 treats tax collected at source and paid to the Central Government as payment of tax on behalf of the person from whom it was collected. Section 390(6) permits rules for giving credit and the tax year for that credit.

This means:

• TCS is not automatically a permanent extra cost;
• it is not the same as GST, road tax, registration fee or insurance;
• the buyer can use the available tax credit when filing the applicable return;
• a refund arises only if the completed income-tax computation shows excess tax paid; and
• payment to the dealer alone does not prove that the dealer correctly deposited and reported the collection.

Never promise a refund merely because TCS was charged. The buyer's final liability, return, reporting and valid credit determine the result.

The current statutory trigger is sale consideration exceeding Rs 10 lakh for a motor vehicle. The Income Tax Department's 2026 TCS guide says the limit applies per item and describes collection on the entire sale consideration of a covered item. It also lists a motor-vehicle dealer or distributor among excluded buyers. The older CBDT Circular No. 22 of 2016 explained the predecessor rule as covering each retail sale of any motor vehicle, not only a “luxury car,” while excluding manufacturer-to-dealer sales.

Before accepting the dealer's calculation, ask for a written breakup showing:

• vehicle and variant;
• the sale consideration used for section 394(1), Table serial 6;
• TCS rate and amount;
• buyer name and PAN;
• invoice and receipt dates; and
• the dealer's legal name and tax collection account details on the document.

The law and official guidance should control the computation. Do not rely on a generic online quotation, because optional equipment, discounts and separate charges can be described differently. If the basis is disputed, obtain a corrected written invoice or tax advice instead of guessing from the ex-showroom price.

1. Confirm the seller and buyer. The invoice, payment receipt and PAN reporting should name the real parties.
2. Check the threshold and calculation. Ask the dealer to identify the exact sale consideration and show 1% separately.
3. Give the correct PAN. A typing error can place the credit against the wrong account or create a mismatch.
4. Keep a tax invoice and TCS receipt. Preserve proof of the amount and date paid.
5. Do not reduce the payment unilaterally. If you dispute collection, obtain a written explanation or correction before delivery.

Use the official Income Tax e-Filing portal and review Form 26AS for the relevant financial year. Match:

• dealer or collector identity;
• amount paid by you;
• amount of TCS reported;
• transaction and reporting period; and
• your PAN and name.

Also keep the invoice and collection proof. If the entry is absent shortly after purchase, first allow for the dealer's statutory reporting cycle rather than assuming fraud. If it remains missing or wrong, write to the dealer with the evidence and ask it to verify the deposit and correct the TCS statement. The dealer—not the buyer—controls its collector statement.

Subject: Correction / confirmation of motor-vehicle TCS under section 394

Vehicle invoice no.: [number and date]
Buyer name and PAN: [name and PAN]
TCS collected: Rs [amount] on [date]

Please provide the TCS certificate or reporting details for this collection and
verify that the buyer PAN, amount and financial year were reported correctly.
Form 26AS presently shows [missing / incorrect entry]. Please file the necessary
correction in your TCS statement and confirm the action in writing.

Attached: invoice, TCS receipt, payment proof and masked Form 26AS extract.

Send a masked extract—do not circulate your password, full return or portal login. Escalate through the dealer's tax or grievance desk and use the Income Tax Department's current e-filing grievance channel if the official account displays a persistent processing mismatch.

Report the TCS credit in the return for the year to which the valid official tax record relates. The correct ITR form and schedules depend on the taxpayer's income sources and status, not on the car purchase alone.

Three outcomes are possible:

• the TCS reduces tax still payable;
• it contributes to a refund because total prepaid tax exceeds the final liability; or
• it is carried through a correction or revised filing process if the statement and return did not initially match.

Use the amount shown in the official record and reconcile it with your evidence. Do not claim the same credit twice or claim an invoice line that the dealer has not deposited and reported. For a material mismatch, consult a tax professional.

The Income Tax Department's 2026 TCS guide lists current buyer exclusions that include the Central or a State Government, embassy or consulate, a local authority, RBI, a public-sector undertaking engaged in passenger transport, and a motor-vehicle dealer or distributor. Use the current Act and official guidance for the exact buyer and transaction; do not infer an exception from an organisation's name.

For financed purchases, do not assume the lender changes who is legally the buyer or eliminates TCS. Ask for the invoice and collection record in the purchaser's correct name. For joint funding, the person named as buyer and reported against the PAN needs special care.

• Calling TCS a dealer surcharge. It is income-tax collected and reported on the buyer's behalf.
• Saying it applies only to luxury cars. CBDT says any motor vehicle over the statutory value can be covered.
• Calculating it only from an online ex-showroom number. Use the documented sale consideration and current official law.
• Ignoring a PAN typo. The invoice can be right while the tax credit is reported to the wrong PAN.
• Claiming a guaranteed refund. A refund depends on the buyer's final tax computation and valid credit.
• Using AIS alone as the legal receipt. Reconcile the dealer evidence with Form 26AS and the e-filing record used for the return.

Section 394(1), Table serial 6, states 1% where motor-vehicle sale consideration exceeds Rs 10 lakh. Section 206C(1F) was the predecessor under the 1961 Act.

No. The current rule says “motor vehicle,” and the official guidance does not limit it to luxury cars. The older CBDT circular expressly made the same point.

The current official TCS guide lists a motor-vehicle dealer or distributor among excluded buyers. The predecessor circular also explained that manufacturer-to-dealer sales were outside the retail collection rule.

Do not withhold it on that basis. The seller's collection duty and your final tax liability are separate. Valid TCS can be taken as credit in the return.

No. It first counts as tax paid on your behalf. A refund exists only when total prepaid tax exceeds the final tax liability after the return is processed.

Review Form 26AS through the official Income Tax e-Filing portal and match the collector, amount, year and PAN with the invoice and receipt.

Ask the dealer in writing to verify the deposit and correct its TCS statement. Keep the invoice, payment proof, correspondence and official tax-record extract.

Financing does not by itself remove the current section 394 rule. Check the buyer, seller, sale consideration and current law for the actual transaction.

• Income Tax Department — Income-tax Act, 2025 and 2026 resources
• Income Tax Department — section 394, collection of tax at source
• Income Tax Department — section 390, tax payment and credit framework
• Income Tax Department — 2026 TCS guide
• Income Tax Department — transition FAQ for the 2025 Act
• CBDT Circular No. 22 of 2016 — predecessor provision
• Income Tax e-Filing portal

• RTI Wiki home
• AIS mismatch and correction guide
• Which ITR form to file
• Vehicle owner-detail guide
• TCS on foreign remittance
• The RTI Playbook