TCS on Car Purchase: Claim Your 1% Refund Before 31 July 2026
The dealer added it to the on-road price, called it "TCS," and you signed. On an ₹18 lakh car that line was ₹18,000 — not a fee, not road tax, not something the showroom keeps. It is your own income tax, paid in advance, sitting with the government right now. You get it back only if you claim it, and the window for FY 2025-26 closes on 31 July 2026.
Summary
Section 206C(1F) charges 1% once the sale value crosses ₹10 lakh — and it charges that 1% on the entire price, not on the amount above the threshold.
| What you bought | Price | TCS at 1% | Charged on |
|---|---|---|---|
| Car | ₹9,90,000 | ₹0 | Below the threshold |
| Car | ₹10,00,000 | ₹0 | Exactly ₹10L — not "exceeding" |
| Car | ₹10,00,001 | ₹10,000 | The full ₹10,00,001 |
| Car | ₹18,00,000 | ₹18,000 | The full ₹18,00,000 |
| Wristwatch | ₹11,00,000 | ₹11,000 | The full ₹11,00,000 |
| Handbag | ₹10,50,000 | ₹10,500 | The full ₹10,50,000 |
Read rows 2 and 3 together. One extra rupee of price moves ₹10,000 of your cash to the government for the next year or so. That is the cliff nobody at the showroom mentions.
Where the 1% actually bites
Your car above ₹10 lakh
Section 206C(1F) applies to any motor vehicle sold above ₹10 lakh. It is per transaction — two ₹6 lakh cars do not add up to a trigger. The seller must collect it at the time of receiving payment, and the ex-showroom consideration is what counts.
Action: pull Form 27D from your dealer. It is the certificate proving the ₹18,000 was actually deposited against your PAN, and dealers rarely hand it over unasked.
The 10 luxury goods notified on 22 April 2025
This is the part most FY 2025-26 filers have not registered. CBDT Notification No. 36/2025 extended the same 1% to ten more categories above ₹10 lakh: wristwatches; art, antiques, paintings and sculptures; collectible coins and stamps; yachts, canoes and helicopters; sunglasses; handbags and purses; shoes; sportswear and sports equipment; home theatre systems; and horses for racing or polo.
It took effect from 22 April 2025 — partway through FY 2025-26. So a watch bought in March 2025 carried no TCS; the same watch in May 2025 carried ₹11,000.
Action: open your AIS for FY 2025-26 and read every TCS entry, not just the car. A high-value purchase you have forgotten is a refund you are not claiming.
Who does not pay it
Dealers buying stock for resale are exempt — it is trading, not consumption. Central and state governments, embassies and local authorities are outside it too. If you are a salaried buyer, none of these help you: you pay, then you reclaim.
The 1% is not a tax — it is an interest-free loan
Every guide tells you TCS is "fully refundable" and stops there. That framing is wrong in a way that costs you money.
Section 206C(4) gives you full credit for the ₹18,000 against your tax liability. Nothing is lost in rupee terms. What is lost is time — and here is the part almost nobody covers correctly. Section 244A pays 0.5% per month on refunds, but it carries a proviso: no interest is payable where the refund is less than 10% of the tax determined under Section 143(1).
Run that against a real salary. A ₹28 lakh CTC in the new regime for FY 2025-26 carries roughly ₹4.13 lakh of tax after cess. Ten per cent of that is ₹41,340. An ₹18,000 car TCS refund is nowhere near it. So you earn zero interest for the entire time the government holds your money.
The rupees come back. The return on them does not.
Real example: Salaried, ₹28L CTC, Bengaluru
Same car, same price, same refund — bought at two different points in the financial year.
| Item | Car bought Apr 2025 | Car bought Mar 2026 |
|---|---|---|
| Ex-showroom price | ₹18,00,000 | ₹18,00,000 |
| TCS u/s 206C(1F) | ₹18,000 | ₹18,000 |
| Cash locked until refund (~Oct 2026) | 18 months | 7 months |
| Interest earned u/s 244A | ₹0 | ₹0 |
| Forgone return at 7% | ₹1,890 | ₹735 |
The honest reading: ₹1,155 should not decide when you buy an ₹18 lakh car. Buy the car when you need the car.
What the table actually shows is scale. The float is trivial at 1% on a car and punishing at 20% on a large remittance under Section 206C(1G) — where ₹5 lakh above the LRS threshold means ₹1 lakh locked up on the same zero-interest terms. If you also sent money abroad this year, the mechanics of claiming it are in our guide on claiming TCS credit in your ITR.
What changes from 1 April 2026
Budget 2026 cut TCS — but not the one on your car.
| Remittance or purchase | FY 2025-26 | FY 2026-27 |
|---|---|---|
| Car or notified luxury goods above ₹10L | 1% | 1% — unchanged |
| Overseas tour package | 5% up to ₹10L, 20% above | Flat 2%, from the first rupee |
| Education or medical, self-funded | 5% above ₹10L | 2% above ₹10L |
| Education funded by an 80E loan | 0.5% above ₹10L | Nil |
| Investment, gift, property | 20% above ₹10L | 20% above ₹10L — unchanged |
One structural note for anyone reading section numbers in a bank notice this year: from 1 April 2026, the foreign-remittance provision formerly at Section 206C(1G) sits at Section 394(1) of the Income-tax Act, 2026. Same tax, renumbered. Section 206C(1F) on cars and luxury goods carries on as it was.
What to do this week
- Open Form 26AS and AIS for FY 2025-26 on the e-filing portal and list every TCS entry — car, watch, handbag, tour package, remittance.
- Ask any dealer or seller for Form 27D where an entry is missing. TCS collected but never deposited is TCS you cannot claim, and the mismatch is on you to chase.
- Check the TCS your ITR has pre-filled against your own list. Pre-fill pulls from 26AS, so anything the seller filed late or against the wrong PAN simply will not appear.
- File by 31 July 2026. A belated return costs ₹5,000 under Section 234F, pushes your refund out by months, and — because the 244A clock restarts at the filing date — cannot be repaired later.
The 1% you already paid
TCS is the rare tax where doing nothing is the only way to actually lose money. Claim it and it is a timing inconvenience. Ignore it and an ₹18,000 credit quietly expires against a return you never filed. Fifteen days is enough time to read one page of your AIS.
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