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ITR filing 2026: If you purchased a car with an ex-showroom price exceeding \u20b910 lakh, you would have paid 1% Tax Collected at Source (TCS) at the time of purchase. While many buyers assume this is an additional cost, the amount can actually be claimed as a tax credit or refunded when filing your Income Tax Return (ITR).<\/p>
Buying a new car is one of the biggest financial decisions for most households. However, many buyers are unaware that the 1% TCS collected by the dealer on vehicles priced above \u20b910 lakh is not a permanent tax outgo.<\/p>
Instead, it functions as a tax credit that can either reduce your final income tax liability or be refunded if the tax collected exceeds the amount you owe. Despite this, many taxpayers fail to claim the benefit simply because they are unaware of the rules or overlook the credit while filing their ITR.<\/p>
What is the 1% TCS?<\/strong><\/p> Under the Income Tax Act, authorised vehicle dealers are required to collect 1% Tax Collected at Source (TCS) on the sale of motor vehicles with an ex-showroom value exceeding \u20b910 lakh.<\/p> For example, if you purchase a car worth \u20b920 lakh, the dealer will collect \u20b920,000 as TCS in addition to the purchase price. The amount is deposited with the Income Tax Department and linked to the buyer’s Permanent Account Number (PAN).<\/p> MUST READ:\u00a0Income Tax Department releases ITR-5 Excel utility for AY 2026-27; here’s who can file and who cannot<\/strong><\/p> The objective of TCS is to help the tax department track high-value purchases and improve tax compliance. It is not an additional tax or fee imposed on the buyer.<\/p> How can you claim it?<\/strong><\/p> Once the dealer deposits the TCS, it appears as a tax credit in the buyer’s Form 26AS and Annual Information Statement (AIS). While filing the Income Tax Return for the relevant financial year, taxpayers can claim this amount under the “Taxes Paid” section.<\/p> The income tax portal automatically adjusts the credit against the taxpayer’s final tax liability.<\/p> DO YOU KNOW:\u00a0How the Income Tax Department’s Assisted Filing feature lets taxpayers authorise CAs without sharing passwords<\/strong><\/p> Documents you should keep ready<\/p> To ensure a smooth claim, buyers should retain:<\/p> Car purchase invoice showing the TCS amount Before filing the return, taxpayers should verify that the TCS has been correctly reflected in Form 26AS.<\/p> How TCS adjustment works<\/strong><\/p> Example 1: Tax adjustment<\/strong> Example 2: Partial refund<\/strong> Example 3: Full refund<\/strong> Formula<\/strong><\/p> TCS = 1% \u00d7 Ex-showroom price of the car When will you receive a refund?<\/strong><\/p> Whether you receive a refund depends on your overall income tax liability.<\/p> If the TCS paid is higher than your total tax payable, the excess amount will be refunded by the Income Tax Department. If the TCS is lower than your tax liability, it will simply be adjusted against the tax due, and you will pay only the balance amount.<\/p> MUST READ:\u00a0Received a crypto tax notice? Here’s what investors need to know while filing ITR this year<\/strong><\/p> If your overall tax liability is zero, you can claim a refund of the entire TCS collected.<\/p> For instance, suppose you purchase a \u20b920 lakh car and pay \u20b920,000 as TCS. If your final income tax liability for the year works out to \u20b98,000, the TCS will first be adjusted against that amount and you will receive a refund of \u20b912,000.<\/p>
Form 27D, the TCS certificate issued by the dealer
PAN used while purchasing the vehicle
Form 26AS reflecting the TCS credit<\/p>
Car Ex-showroom Price\u00a0\u00a0 \u00a0\u00a0\u00a0 \u00a0 \u00a0\u00a0 \u00a0<\/strong><\/td> 1% TCS Paid<\/strong><\/td> \u00a0Final Income Tax Liability\u00a0<\/strong><\/td> \u00a0TCS Adjustment<\/strong><\/td> Refund \/ Tax Payable<\/strong><\/td> <\/tr> \u20b912 lakh<\/td> \u20b912,000<\/td> \u20b920,000<\/td> \u20b912,000 adjusted<\/td> Pay balance tax of \u20b98,000<\/td> <\/tr> \u20b915 lakh<\/td> \u20b915,000<\/td> \u20b915,000<\/td> Fully adjusted<\/td> No refund, no extra tax<\/td> <\/tr> \u20b920 lakh<\/td> \u20b920,000<\/td> \u20b98,000<\/td> \u20b98,000 adjusted<\/td> Refund of \u20b912,000<\/strong><\/td> <\/tr> \u20b925 lakh<\/td> \u20b925,000<\/td> \u20b90<\/td> Nil tax payable<\/td> Full refund of \u20b925,000<\/strong><\/td> <\/tr> <\/tbody> <\/table>
Car price: \u20b912 lakh
TCS collected (1%): \u20b912,000
Total income tax payable: \u20b920,000
Less: TCS credit: \u20b912,000
Balance tax to be paid = \u20b98,000<\/p>
Car price: \u20b920 lakh
TCS collected: \u20b920,000
Total income tax payable: \u20b98,000
Less: TCS credit: \u20b920,000
Refund = \u20b912,000<\/p>
Car price: \u20b925 lakh
TCS collected: \u20b925,000
Total income tax payable: \u20b90
Less: TCS credit: \u20b925,000
Refund = \u20b925,000<\/p>
Refund = TCS \u2013 Final tax liability (if TCS is higher)
Additional tax payable = Final tax liability \u2013 TCS (if tax liability is higher)<\/p>