A TCS charge is an extra amount a seller adds to your bill and collects from you at the time of certain purchases or foreign remittances, then deposits with the central government against your PAN. It is not a final tax. When you file your income tax return for the year, the amount shows up as a credit against your total tax liability, and if it exceeds what you owe, the difference is refunded to your bank account.1Livemint. TCS on Car Purchases Explained
TCS stands for Tax Collected at Source, and it is governed by the Income-tax Act. It applies only to a defined list of high-value goods, foreign remittances, overseas tour packages, and luxury items. On everything else, no TCS is charged.
When You Will See a TCS Charge
The charge is triggered by the type of transaction, not by who you are. If the item or payment falls in one of the specified categories and crosses the applicable threshold, the seller is legally required to collect TCS from you.
Motor Vehicles Over ₹10 Lakh
A car or other motor vehicle attracts TCS at 1% when the sale consideration for that single vehicle exceeds ₹10 lakh. The 1% is calculated on the ex-showroom price inclusive of applicable taxes, but excluding road tax, registration fees, and insurance. It is collected when the seller receives payment, whether that is an advance or the final invoice at delivery. The threshold is per vehicle, so buying two cars each priced under ₹10 lakh does not trigger the charge.2Taxmann. Newly Introduced TCS on Purchase of Motor Vehicles
Luxury Goods Over ₹10 Lakh
Since April 2025, the same 1% rate applies to ten categories of luxury goods when a single item is priced above ₹10 lakh, following a Central Board of Direct Taxes notification aimed at bringing high-value discretionary spending into the tax trail.3EY India. CBDT Notifies Ten Luxury Goods for Income Tax Collection at Source The list covers wristwatches; art pieces such as antiques, paintings, and sculptures; collectibles like coins and stamps; yachts, rowing boats, canoes, and helicopters; sunglasses; handbags and purses; shoes; sportswear and equipment including golf kits and skiwear; home theatre systems; and horses for racing or polo.
The threshold is per item. Buying several items each below ₹10 lakh does not trigger TCS even if the total bill runs higher.4Times of India. New 1% TCS on Luxury Goods: Full List, Limits, FAQs
Traditional Specified Goods
Certain goods have been subject to TCS for decades. Under the current rates effective from April 2026, these all attract 2%: alcoholic liquor for human consumption, tendu leaves, timber and other forest produce, scrap, and minerals including coal, lignite, and iron ore.5BCA Online. Convergence and Divergence: TDS and TCS Changes in Income Tax Act 2025 vs 1961 Leases and licences for parking lots, toll plazas, or mines and quarries also attract 2%.6Income Tax India. Tax Collection at Source (TCS)
One category that used to catch many ordinary purchases is now gone. The 0.1% TCS on general sale of goods above ₹50 lakh from large sellers, under the old Section 206C(1H), was withdrawn effective April 1, 2025.7Income Tax India. TCS Rates
TCS on Foreign Remittances
If you send money abroad as a resident Indian, your bank will collect TCS under the Reserve Bank of India’s Liberalised Remittance Scheme, which allows individuals to remit up to USD 250,000 per financial year.8HDFC Bank. Revision in TCS on LRS Transactions The rate depends entirely on why you are remitting.
If the remittance is for education and it is funded by a loan from a recognized financial institution, there is no TCS at all, regardless of the amount. For self-funded education and for medical treatment abroad, no TCS applies up to ₹10 lakh in a financial year; anything above ₹10 lakh attracts 2%.9SC Bank. LRS Amendment in TCS For every other purpose, including investments abroad, gifts, or buying property overseas, TCS is zero up to ₹10 lakh in a year and 20% on the amount above ₹10 lakh.8HDFC Bank. Revision in TCS on LRS Transactions
The ₹10 lakh threshold is cumulative across every authorized dealer you use and across every purpose during the financial year, so splitting a remittance across banks does not sidestep it.10UCO Bank. TCS on Outward Remittances (LRS) Spending on your international credit card while travelling abroad is not treated as an LRS remittance and does not attract TCS.9SC Bank. LRS Amendment in TCS
Overseas Tour Packages
Any package for travel outside India that bundles at least two elements, such as an international ticket and hotel accommodation, is an overseas tour package for TCS purposes.6Income Tax India. Tax Collection at Source (TCS) The Union Budget 2026 replaced the earlier tiered rate with a flat 2%, applied from the first rupee with no minimum amount.11Economic Times. Budget 2026: Lower TCS on Overseas Tour Packages Gives Relief to Travellers
When the Rate Is Doubled
If you do not furnish a valid PAN or Aadhaar number at the time of the transaction, the seller must collect TCS at double the normal rate or 5%, whichever is higher.12Protean Technologies. PAN Inoperative: TDS/TCS Impact and Deadline A PAN that has not been linked with Aadhaar is treated as “inoperative” and triggers the same higher rate, so it is worth checking your PAN status before a large purchase or remittance.8HDFC Bank. Revision in TCS on LRS Transactions
A separate higher-rate rule that used to hit buyers who had not filed returns in the previous two years, under Section 206CCA, was removed effective April 1, 2025.13TaxSutra. Omission of Section 206CCA
Who Does Not Pay TCS
Some buyers and transactions sit outside the TCS net entirely:
- The Central Government, State Governments, local authorities, and foreign embassies and consulates are exempt across all categories.6Income Tax India. Tax Collection at Source (TCS)
- Individuals buying goods like liquor, scrap, or forest produce for personal consumption at retail are exempt.
- Buyers who purchase scrap, timber, or minerals for manufacturing, processing, or power generation, rather than for trading, can avoid TCS by giving the seller a declaration in Form 127 (formerly Form 27C).14Income Tax India. Form No. 127
- On motor vehicles, sales between manufacturers and their dealers or distributors are exempt, as are sales to public sector passenger transport units and the Reserve Bank of India.2Taxmann. Newly Introduced TCS on Purchase of Motor Vehicles
- Education remittances funded by a loan from a recognized financial institution carry no TCS at any amount.
- Non-resident Indians without a permanent establishment in India are generally not subject to TCS on remittances or tour packages.
How to Claim the Credit or Get a Refund
TCS is an advance collection, not a final tax, so you get every rupee back either as a credit against your tax liability or as a refund. The steps are the same regardless of what triggered the charge.
First, ask the seller for Form 27D, the TCS certificate (renumbered as Form 130 under the Income-tax Act, 2025). It records the amount collected and deposited against your PAN. If the seller does not issue it, you can download it yourself from the TRACES portal.15ClearTax. TCS on Car Purchase
Second, check Form 26AS on the Income Tax e-filing portal. This is your consolidated tax credit statement, and the TCS entry should appear there once the seller has deposited the money. If it does not match what you were charged, take it up with the seller before filing.
Third, declare the TCS in the relevant section of your income tax return for the year. It is set off against your total tax liability. If it is more than what you owe, or if you have no tax liability, the excess is refunded to the bank account linked to your PAN.1Livemint. TCS on Car Purchases Explained
Applying for a Lower or Nil TCS Certificate
If you expect your income for the year to be low enough that the standard TCS rate would clearly result in more collection than tax owed, you can apply in advance for a certificate authorizing the seller to collect at a lower rate or nil. The application is filed electronically through the TRACES portal using Form 128, which replaced the earlier Form 13. You will need your PAN, the seller’s TAN, an estimate of your income and tax computation, your income tax returns for the previous four years, and supporting financial statements.16Income Tax India. Form No. 128 Once the Assessing Officer approves it, the seller is legally bound to collect at the reduced rate for the period specified in the certificate.