In our earlier article, we have already discussed how tax is collected at the rate of 20% on foreign remittance. This is called TCS, which stands for Tax Collected At Source. Do you know, income tax laws also require a seller of bike, cars, EVs and certain other capital goods and services to collect tax on the payments received above a specified amount?
Tax collected at source (TCS) provisions are also applicable to motor vehicles. If you buy any motor vehicles costing above 10,00,000 rupees, then seller of the motor vehicle will be collecting tax from your payments in order to deposit the same against your PAN with the income tax department.
If the seller doesn’t collect tax, then such seller will be considered as assessee in default. Due to this reason, every seller will prefer to collect tax while receiving payments from you as a buyer of motor vehicle costing more than 10,00,000 ruppees.
TCS Rates on buying of a motor vehicle
The seller is required to collect tax while selling motor vehicle at the rate of 1% on the cost if its exceeds 10,00,000 ruppes.
If the buyer does not have PAN , then the seller is required to deduct TCS at the rate of 20%.
In case the buyer has PAN but income tax return has not been filed for last 2 financial year, then rate of TCS is 5%. Which means if you want to purchase a motor vehicle costing more than 10,00,000 but missed any one or two preceeding year’s income tax return filing, then the seller will collect tax from your payments @5%.
Table showing rate of TCS on buying of motor vehicle
| Particulars | TCS rate |
| Normal rate | 1% |
| Buyer not having PAN | 20% |
| Buyer having PAN but not filed income tax return for last 2 years | 5% |
Even TCS is applicable to the second hand market.
Above provisions will not be applicable if the buyer is the Central Government, a State Government, an Embassy, high commission, consulate, trade represenation of a foregin government, local authority or public sector company which is engaged in the business of carrying of passengers.
