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If you are planning to buy a new car, there is an important tax rule you should know before making the payment. Most buyers are unaware that car dealers deduct 1% TCS (Tax Collected at Source) on vehicles priced above ₹10 lakh. While this amount is deposited with the government, many buyers forget to claim it in their Income Tax Return (ITR). As a result, the money remains unclaimed, even though it can easily be adjusted against your tax liability or refunded. Here’s a detailed guide explaining how TCS on car purchases works and how you can claim it back.

Why Do Dealers Deduct 1% TCS on Cars?

According to the Income Tax Act, if you buy a vehicle worth more than ₹10 lakh, the dealer is legally required to deduct 1% TCS on the sale value. This amount is collected at the time of purchase and deposited directly with the government.

However, most car buyers either do not know about this rule or forget to claim the deducted amount while filing their ITR. Experts say this is one of the most common reasons taxpayers lose out on refunds they are entitled to.

How to Check TCS in Form 26AS

Tax expert and TaxBuddy founder Sujit Bangar explains that the easiest way to verify TCS deducted by a dealer is through Form 26AS, which is available on the Income Tax Department website.

Here’s how you can check it:

1. Visit the Income Tax e-filing portal and log in using your PAN.

2. Go to the ‘View Form 26AS’ section.

3. Select the relevant financial year in which you purchased the car.

4. Download your Form 26AS statement.

5. Look for the entry showing 1% TCS deposited by the dealer.

If the dealer has correctly deposited the amount, it will clearly appear in your TCS details in Form 26AS.

How to Claim This TCS in Your Income Tax Return

Once you confirm the TCS entry in Form 26AS, the next step is to claim it while filing your ITR. The process is simple:

• Enter the TCS amount under the ‘Taxes Paid’ section of your income tax return.

• The system automatically adjusts it against your total tax liability.

• If the TCS paid is higher than your tax due, the Income Tax Department will issue a refund to your bank account.

However, you will not receive the refund unless you claim this amount in your ITR, even though it appears in Form 26AS.

Bangar adds that many taxpayers lose refunds simply because they fail to claim the TCS amount during return filing.

What Does Form 26AS Include?

Form 26AS is a consolidated annual tax statement that records all tax-related transactions linked to your PAN. It includes:

• TDS (Tax Deducted at Source)

• TCS (Tax Collected at Source)

• Advance tax or self-assessment tax

• Refunds issued

• High-value financial transactions

If the dealer has deposited the TCS, it will reflect in this statement without fail.

TCS Applies to Other Transactions Too

TCS isn’t limited to car purchases alone. Under the Liberalised Remittance Scheme (LRS) and specific tax provisions, TCS is also levied on:

• Foreign remittances

• International tour packages

• Certain high-value business transactions

Taxpayers are advised to regularly review their Form 26AS and reconcile all TDS and TCS entries to avoid missing out on refunds or adjustments.

Bottom Line

If you are buying a car worth more than ₹10 lakh, the dealer must deduct 1% TCS and deposit it with the government. Since this amount is treated as tax paid on your behalf, you can claim it while filing your income tax return. Whether it reduces your tax liability or results in a refund, the benefit comes back to you — but only if you claim it properly.