TCS on cars is Tax Collected at Source: a 1% levy that dealers must collect on any motor vehicle sold for more than ₹10 lakh, under Section 206C(1F) of the Income Tax Act. It is not an extra cost — the amount is credited against your PAN and can be adjusted against your income tax or claimed as a refund.
How it works
If the car's sale value exceeds ₹10 lakh, the dealer collects 1% of that value at the time of payment and deposits it with the government against your PAN. The credit shows up in your Form 26AS and Annual Information Statement, and you set it off against your tax liability when filing your ITR — or get it refunded if you owe less tax. The threshold is per transaction, applies to all vehicles (not just luxury cars), and since 1 April 2025 the same section also covers other specified luxury goods above ₹10 lakh.
Why it matters when buying
TCS inflates your upfront outgo, and because it's part of the invoice, it can quietly raise your loan amount too. When comparing quotes, check whether the dealer's on-road price breakup lists TCS as a separate line — it should never be hidden inside "handling charges". Buyers such as central and state governments and certain public bodies are exempt.
A concrete example
A car invoiced at ₹12 lakh attracts ₹12,000 as TCS. You pay it at delivery, the dealer deposits it against your PAN, and at ITR time it works exactly like advance tax already paid — reduce your tax bill by ₹12,000 or claim it back.