TCS on Sale of Motor Vehicle above ₹10 lakh — Seller compliance

TCS on Sale of Motor Vehicle Above ₹10 Lakh: Complete Seller Compliance Guide for 2026

TCS on Sale of Motor Vehicle Above ₹10 Lakh – Rate, Applicability, Seller Compliance, Section 394, Form 143, Due Dates, PAN Rules, GST Treatment, Accounting Entries, Penalties and Practical Examples

Last Updated: 11 August 2026

The sale of high-value motor vehicles in India carries an important Tax Collected at Source (TCS) compliance requirement. Where the prescribed conditions are satisfied, the seller is required to collect TCS from the buyer at 1% of the sale consideration when the value of the motor vehicle exceeds ₹10 lakh.

For transactions governed by the Income-tax Act, 1961, this requirement was popularly known under Section 206C(1F). From 1 April 2026, the Income-tax Act, 2025 has come into force and the TCS framework has been reorganised. The corresponding provision for sale of motor vehicles and other notified high-value goods is now contained in Section 394(1), Table Sl. No. 6 of the Income-tax Act, 2025. The rate for motor vehicles continues to be 1%.

This change is important for automobile dealers, vehicle sellers, companies, firms, eligible individuals/HUFs and tax professionals because the underlying TCS obligation continues, but the section numbers, compliance forms and reporting framework have changed from Tax Year 2026-27.

This article explains the complete compliance position in detail.

What is TCS on Sale of Motor Vehicle Above ₹10 Lakh?

TCS means Tax Collected at Source.

Under this mechanism, the seller collects a specified amount of income tax from the buyer in addition to the transaction consideration and deposits the collected amount with the Central Government.

In the case of high-value motor vehicles, the law requires the seller to collect TCS where the value of the motor vehicle exceeds ₹10,00,000.

Under the current Income-tax Act, 2025, Section 394(1), Table Sl. No. 6 covers:

Motor vehicles having sale consideration exceeding ₹10 lakh; and

Other goods notified by the Central Government having the prescribed value.

The applicable TCS rate for the motor vehicle category is 1%.

The earlier Section 206C(1F) of the Income-tax Act, 1961 contained substantially the same motor vehicle TCS requirement. The Finance (No. 2) Act, 2024 also expanded the provision to permit notification of other goods above ₹10 lakh. CBDT subsequently notified ten categories of high-value goods with effect from 22 April 2025.

Therefore, for a seller dealing in motor vehicles, the basic rule remains simple:

If a qualifying motor vehicle has a value exceeding ₹10 lakh, TCS is generally required to be collected at 1%, subject to the statutory seller and buyer conditions.

Section 206C(1F) vs Section 394 – What Changed in 2026?

One of the biggest compliance changes for tax professionals and businesses is the transition from the Income-tax Act, 1961 to the Income-tax Act, 2025.

Earlier position – up to 31 March 2026

The TCS provision for sale of motor vehicles was contained in:

Section 206C(1F), Income-tax Act, 1961

Current position – from 1 April 2026

The corresponding provision is contained in:

Section 394(1), Table Sl. No. 6, Income-tax Act, 2025

The Income Tax Department has specifically clarified that TCS provisions are consolidated under Section 394 of the new Act. Amounts received on or before 31 March 2026 continue to be governed by the old Act, whereas amounts received on or after 1 April 2026 are governed by the Income-tax Act, 2025.

Quick comparison

Particular	Up to 31 March 2026	From 1 April 2026
Main TCS provision	Section 206C	Section 394
Motor vehicle provision	Section 206C(1F)	Section 394(1), Table Sl. No. 6
TCS rate	1%	1%
Threshold	Above ₹10 lakh	Above ₹10 lakh
Quarterly TCS statement	Form 27EQ	Form 143
TCS certificate	Form 27D	Form 133
Governing framework	Income-tax Act, 1961	Income-tax Act, 2025

The change is therefore not a removal of motor vehicle TCS. It is primarily a recodification and restructuring of the law and compliance forms, along with certain other changes under the new Act.

Who is Required to Collect TCS on Motor Vehicles?

This is one of the most important questions because not every person selling a motor vehicle is automatically treated as a seller for TCS purposes.

Under Section 402(33) of the Income-tax Act, 2025, for Section 394(1), Table Sl. Nos. 1 to 6, the definition of “seller” includes specified categories such as:

Central Government;

State Government;

Local authority or specified corporation/authority established under law;

Company;

Firm;

Co-operative society; and

Individual or HUF meeting the prescribed turnover threshold.

For an individual or HUF, the preceding Tax Year turnover condition is:

Business: total sales, gross receipts or turnover exceeding ₹1 crore; or

Profession: gross receipts exceeding ₹50 lakh.

The relevant turnover is that of the immediately preceding Tax Year.

Important practical point

Suppose an individual sells an expensive personal car.

The question is not merely whether the car is worth more than ₹10 lakh.

The seller status must also be examined under the applicable definition.

For example, if an individual is not within the statutory definition of seller for the relevant TCS provision, merely selling a personal vehicle does not automatically create a TCS collection obligation under the motor-vehicle TCS provision.

For companies, firms and co-operative societies, the seller definition is much broader.

Does TCS Apply Only to Car Dealers?

No.

A common misconception is:

“Only automobile dealers have to collect TCS.”

That is not the correct way to analyse the law.

The statutory framework refers to a seller, and the definition of seller covers companies, firms, co-operative societies, specified government entities and qualifying individuals/HUFs.

Therefore, the compliance analysis should be based on:

Who is the seller?

Is the person covered by the statutory definition?

What is being sold?

What is the value of the motor vehicle?

Who is the buyer?

Is the transaction a qualifying retail transaction?

When is consideration received?

The label “car dealer” by itself should not be treated as the only test.

What is the ₹10 Lakh Threshold?

The motor vehicle TCS threshold is ₹10,00,000.

The crucial word is “exceeding”.

Therefore:

Vehicle value of ₹9,50,000 → no TCS under this provision.

Vehicle value of ₹10,00,000 → no TCS merely because it reaches ₹10 lakh.

Vehicle value of ₹10,00,001 → TCS provision gets triggered, subject to other conditions.

Vehicle value of ₹15,00,000 → TCS applies.

Vehicle value of ₹50,00,000 → TCS applies.

The Income Tax Department’s threshold table specifically states that no TCS is required where the value of the motor vehicle/notified goods does not exceed ₹10 lakh.

Is the ₹10 Lakh Limit Per Vehicle or Per Buyer?

This is extremely important.

The ₹10 lakh threshold is considered with reference to the individual motor vehicle/item, rather than aggregating all purchases of the buyer during the year.

CBDT Circular No. 22/2016 clarified that TCS on motor vehicles is applicable to each sale and not on aggregate annual sales.

Example 1

A buyer purchases:

Car 1 – ₹8 lakh

Car 2 – ₹8 lakh

Total purchases = ₹16 lakh.

Neither vehicle individually exceeds ₹10 lakh.

Therefore, the motor-vehicle TCS provision does not get triggered merely because the aggregate is ₹16 lakh.

Example 2

A buyer purchases:

Car 1 – ₹12 lakh

Car 2 – ₹8 lakh

Car 1 exceeds ₹10 lakh.

Therefore, the qualifying sale of Car 1 attracts TCS, subject to the other conditions.

Car 2 does not become subject to Section 394 merely because the buyer has already purchased another vehicle.

Is TCS Applicable to Luxury Cars Only?

No.

The law does not restrict the motor-vehicle provision to luxury cars.

The CBDT had specifically clarified that TCS applies to the sale of any motor vehicle exceeding the prescribed value, not merely luxury vehicles.

Therefore, depending on the transaction value, the provision may cover:

SUVs;

Sedans;

Premium cars;

Electric cars;

High-value motorcycles;

Other qualifying motor vehicles.

The classification should be determined based on whether the item is a motor vehicle covered by the law and whether the prescribed value threshold is exceeded.

What is the Rate of TCS on Motor Vehicles in 2026?

The standard TCS rate is:

1%

Under Section 394(1), Table Sl. No. 6 of the Income-tax Act, 2025, sale consideration exceeding ₹10 lakh in the case of a motor vehicle attracts TCS at 1%.

Example

Suppose a qualifying vehicle is sold for:

₹20,00,000

TCS:

₹20,00,000 × 1% = ₹20,000

The buyer therefore pays:

Vehicle consideration = ₹20,00,000

TCS = ₹20,000

Total cash outflow towards seller = ₹20,20,000

The ₹20,000 is not the seller’s income. It is tax collected on behalf of the Government and is ultimately available as tax credit to the buyer, subject to proper reporting and reflection in the buyer’s tax records.

Is TCS Charged on the Entire Amount or Only on the Amount Above ₹10 Lakh?

This is one of the most common mistakes.

The TCS is not restricted to the amount exceeding ₹10 lakh.

If the vehicle value is above ₹10 lakh, TCS is calculated on the applicable sale consideration, not merely on the excess over ₹10 lakh.

Example

Car value = ₹12,00,000

Incorrect calculation:

₹12,00,000 − ₹10,00,000 = ₹2,00,000

1% of ₹2,00,000 = ₹2,000

This is incorrect.

Correct calculation:

₹12,00,000 × 1% = ₹12,000

Another example

Car value = ₹25,00,000

TCS = ₹25,00,000 × 1%

= ₹25,000

Thus, once the threshold is crossed, the 1% applies to the applicable sale consideration.

When is TCS Required to be Collected?

For motor vehicle transactions, TCS is linked to the receipt of consideration.

The old Section 206C(1F) expressly provided that TCS was to be collected at the time of receipt of the amount from the buyer. CBDT Circular No. 22/2016 also illustrated that where payment was made in instalments, TCS was collected at each receipt.

The current Section 394 framework likewise provides the relevant collection timing in its statutory table.

Example – Advance Payment

Car value = ₹20 lakh.

Buyer pays:

Booking advance = ₹5 lakh

Delivery payment = ₹15 lakh

TCS:

At receipt of ₹5 lakh:

1% = ₹5,000

At receipt of ₹15 lakh:

1% = ₹15,000

Total TCS:

₹20,000

This is why the accounting system should be configured to identify qualifying vehicles before recording receipts.

Does the Mode of Payment Matter?

No.

The TCS obligation for qualifying motor vehicle sales is not dependent on whether the payment is made through:

Cash;

Cheque;

Demand draft;

Bank transfer;

UPI;

NEFT;

RTGS;

Card; or

Another permitted mode.

CBDT Circular No. 22/2016 specifically clarified that the motor vehicle TCS provision is not dependent on the mode of payment.

However, separate restrictions under other provisions of the Income-tax Act may apply to cash transactions. TCS compliance should therefore not be confused with cash-payment restrictions.

Is TCS Applicable on Manufacturer-to-Dealer Sales?

This area requires careful handling.

CBDT Circular No. 22/2016 clarified that the motor vehicle TCS provision was intended to cover retail sales and accordingly would not apply to the sale of motor vehicles by manufacturers to dealers/distributors under Section 206C(1F).

CBDT Circular No. 17/2020 further explained the interaction between Section 206C(1F) and the then Section 206C(1H), stating that Section 206C(1F) was intended for consumer sales and not dealer sales, while dealer transactions could fall under the general goods-sale TCS provision where applicable.

However, there is an important 2025-26 onward development.

Section 206C(1H), which imposed TCS on general sales of goods above ₹50 lakh subject to conditions, ceased to apply from 1 April 2025. The Income Tax Department’s current material expressly notes that Section 206C(1H) is not applicable from 1 April 2025.

Therefore, professionals should not mechanically apply old 206C(1H) logic to FY 2025-26 or Tax Year 2026-27 transactions.

For manufacturer-to-dealer transactions, the exact nature of the transaction and the current buyer-side TDS provisions should be separately examined rather than automatically treating it as 1% motor-vehicle TCS.

What Happened to Section 206C(1H)?

Section 206C(1H) historically required certain sellers to collect TCS on sale of goods exceeding ₹50 lakh in aggregate, subject to conditions including the seller’s preceding-year turnover.

This provision has been withdrawn with effect from 1 April 2025. The current Income Tax Department TCS rate page expressly notes that Section 206C(1H) is not applicable from 1 April 2025.

This is an important 2026 update.

Therefore:

Do not use the old ₹50 lakh general-sale TCS calculation for current motor-vehicle transactions merely because the buyer or seller has crossed ₹50 lakh.

For a motor vehicle above ₹10 lakh, the specific motor vehicle provision is the relevant TCS provision.

Who is Excluded from TCS as Buyer?

The buyer definition contains important exclusions.

The Income Tax Department’s current TCS guidance identifies specified buyers for whom TCS is not collected in the motor vehicle/high-value goods context. These include certain government and public-sector entities and specified institutional buyers.

The exclusions generally include categories such as:

Central Government;

State Government;

Embassy;

Consulate;

High Commission;

Legation;

Commission;

Trade representation of a foreign State;

Local authority; and

Specified public sector companies engaged in passenger transport.

The exact status of the buyer should be documented before applying an exemption.

Practical advice

Do not simply mark a customer as “Government” in the accounting software and skip TCS.

The seller should maintain documentary evidence establishing the buyer’s eligible status.

What About Public Sector Companies?

Not every public sector company should automatically be treated as exempt for every TCS provision.

The relevant statutory exclusion must be checked.

For motor vehicle TCS, the specific exclusion historically included public sector companies engaged in passenger transport. The Income Tax Department’s current TCS guidance continues to identify this category in its motor vehicle TCS explanation.

Therefore, the seller should obtain sufficient documentation to establish that the buyer falls within the prescribed exclusion.

Is PAN Required from the Buyer?

Yes.

The seller should collect and correctly record the buyer’s:

PAN; and

Where applicable, Aadhaar details as permitted by the law.

PAN reporting is particularly important because TCS is ultimately credited to the buyer.

A wrong PAN can result in:

Credit mismatch;

TCS not appearing correctly in the buyer’s tax statement;

Buyer complaints;

Correction statements;

Additional compliance work;

Potential higher-rate consequences where PAN is not validly furnished.

The Income Tax Department’s current TCS guidance states that failure to furnish PAN can trigger higher TCS rates under the applicable provisions.

What Happens if Buyer Does Not Furnish PAN?

Under the old framework, Section 206CC contained higher TCS rules where the collectee failed to furnish PAN/Aadhaar.

The general mechanism was higher of:

Twice the specified rate; or

5%,

subject to the statutory conditions and applicable ceiling.

The Income Tax Department continues to state the PAN-related higher-rate principle in its TCS guidance.

For a motor vehicle otherwise subject to 1% TCS, failure to furnish valid PAN/Aadhaar can therefore create a higher-rate issue.

Important 2025 change

The separate higher TCS mechanism for specified non-filers under Section 206CCA was omitted with effect from 1 April 2025. Therefore, the old “non-filer higher TCS” concept under Section 206CCA should not be applied to current Tax Year 2026-27 motor vehicle transactions.

This distinction is important:

Missing PAN rule ≠ old non-filer rule.

They should be analysed separately.

Is TCS Applicable if the Buyer is a Dealer?

This is a specialised area.

The old CBDT guidance distinguished retail consumer sales from dealer/distributor sales. CBDT Circular No. 22/2016 clarified that manufacturer-to-dealer/distributor sales were outside the specific 1% motor vehicle TCS provision.

CBDT Circular No. 17/2020 also explained the interaction with the then Section 206C(1H).

Since the general goods TCS provision under Section 206C(1H) has been withdrawn from 1 April 2025, the old interaction cannot simply be copied into current-year compliance.

Professional approach

For a dealer-to-dealer or manufacturer-to-dealer transaction, check:

Whether the transaction is genuinely wholesale/dealer-level;

Whether the buyer is a dealer/distributor;

Whether the seller is a manufacturer or another dealer;

Whether any specific exemption/clarification applies;

Whether buyer-side TDS on purchase of goods is applicable; and

Whether any other current TCS provision applies.

This should be documented in the tax working paper.

TCS and GST – One of the Most Important Practical Issues

The treatment of GST in TCS calculations is a frequently debated practical issue.

For TCS on sale of goods, CBDT Circular No. 17/2020 clarified, in relation to Section 206C(1H), that no adjustment was required for indirect taxes including GST because collection was linked to the receipt of sale consideration.

For motor vehicle TCS specifically, there has been professional discussion regarding whether GST should be excluded from the base.

The safest compliance approach is to distinguish between:

Threshold determination, and

TCS collection base.

The statutory wording refers to the value/sale consideration of the qualifying motor vehicle.

CBDT’s historical guidance does not provide a standalone 206C(1F) clarification equivalent to the TDS circular that says GST separately shown should be excluded. Accordingly, sellers should adopt a consistent documented methodology based on the transaction structure and current statutory guidance.

A number of professional and tax references treat the TCS base for motor vehicle sales as the full sale consideration/invoice value, including GST, while some professional material argues for exclusion where GST is separately shown.

Recommended compliance position

For a business implementing an ERP rule, do not simply copy the TDS-on-GST logic into TCS.

The seller should maintain a written tax-position note and follow the treatment consistently.

Where the transaction is high-value and the tax base is material, professional tax advice should be obtained before adopting an aggressive exclusion.

Example of TCS with GST

Suppose:

Basic vehicle price = ₹15,00,000

GST and other statutory charges = ₹2,70,000

Invoice value = ₹17,70,000

If the seller’s adopted TCS base is the full sale consideration:

TCS @ 1% = ₹17,700

Total amount including TCS = ₹17,87,700

The seller should clearly disclose the TCS separately from GST in the invoice/accounting system.

Important GST point

TCS under the Income-tax Act is not itself a GST component.

It should not be treated as additional taxable value merely because it is collected from the buyer.

The GST treatment of TCS under the Income-tax Act has been separately clarified by the indirect-tax authorities, and the TCS amount is generally treated as an interim income-tax collection rather than consideration for the supply.

Is TCS Part of the Vehicle Cost for the Buyer?

Normally, TCS is treated as a tax credit/receivable of the buyer, not as the seller’s revenue.

For accounting purposes, a buyer may generally record:

Motor Vehicle A/c Dr.

TCS Receivable / Income Tax Receivable A/c Dr.

To Bank/Creditor A/c

For example:

Vehicle cost = ₹20,00,000

TCS = ₹20,000

The buyer can recognise:

Motor Vehicle = ₹20,00,000

TCS receivable = ₹20,000

The ₹20,000 is not simply an expense if the buyer is entitled to claim it as tax credit.

Accounting treatment should, however, be aligned with the applicable accounting standards and the buyer’s specific facts.

Is TCS an Additional Tax on the Buyer?

TCS is generally not a final additional tax.

It is a mechanism for collecting tax in advance.

The buyer gets credit for the TCS collected and correctly reported against the buyer’s PAN.

Therefore, if ₹25,000 TCS is collected on a car purchase, the buyer does not normally lose ₹25,000 permanently.

It becomes tax credit subject to proper reporting.

If the buyer’s final tax liability is lower than the available tax credits, the excess may result in a refund after filing the income-tax return.

How Does the Buyer Claim TCS Credit?

The buyer should verify that the TCS is correctly reported against the buyer’s PAN.

The buyer should generally check:

Form 26AS;

AIS/tax information;

TCS certificate; and

Income-tax return tax-credit schedule.

For Tax Year 2026-27, the new TCS certificate is Form 133, which replaces old Form 27D.

If the TCS is not reflected correctly, the buyer should contact the seller and request correction of the TCS statement.

Form 27D Replaced by Form 133

This is another major 2026 update.

For transactions governed by the Income-tax Act, 2025:

Old certificate

Form 27D

New certificate

Form 133

Form 133 is the certificate issued by the TCS collector to the collectee and serves as evidence of TCS collection and reporting.

The certificate is important because it helps the buyer reconcile the TCS credit available against the buyer’s PAN.

Form 27EQ Replaced by Form 143

From Tax Year 2026-27, the quarterly TCS statement has been redesigned.

Earlier

Form 27EQ

Current

Form 143

The Income Tax Department’s official Form 143 user manual states that Form 143 is the quarterly statement filed by TCS collectors for specified transactions.

The official Income Tax Department also lists Form 143 as the replacement for Form 27EQ.

This is a key compliance change for all automobile dealers and other TCS collectors.

Form 143 – Quarterly TCS Return Due Dates

For Tax Year 2026-27, Form 143 is filed quarterly.

Quarter	Period	Due Date
Q1	April–June	31 July
Q2	July–September	31 October
Q3	October–December	31 January
Q4	January–March	31 May

The Income Tax Department’s official Form 143 user manual confirms these due dates.

Example

TCS collected during:

April, May and June 2026

must be reported in:

Form 143 – Q1 of Tax Year 2026-27

Due date:

31 July 2026

TCS Deposit Due Date

Quarterly return filing and monthly TCS deposit are two different compliance requirements.

The seller must not wait until the quarterly Form 143 filing date to deposit TCS.

TCS collected during a month is generally required to be deposited by the 7th day of the following month, subject to the specific rules applicable to the collector.

For example:

TCS collected in August 2026:

Deposit due date = 7 September 2026

The return for the quarter is filed separately.

This distinction is critical because a seller may deposit TCS on time but file Form 143 late—or vice versa.

Practical TCS Compliance Calendar

A vehicle dealer should maintain the following calendar:

Every sale

Check vehicle value.

Check seller eligibility.

Check buyer status.

Verify PAN.

Identify TCS applicability.

Calculate TCS.

Collect TCS from buyer.

Record TCS separately.

Every month

Reconcile TCS collected.

Reconcile receipts.

Deposit TCS by due date.

Verify challan details.

Every quarter

Prepare Form 143.

Verify PAN.

Verify amount collected.

Verify challan details.

File return.

Download processing/acknowledgement.

Generate/issue Form 133 where applicable.

New Form 143 – Practical Filing Process

The Income Tax Department’s Form 143 user manual gives the following broad process:

Login to the Income Tax e-Filing portal.

Go to e-File.

Select Income Tax Forms.

Select the category for forms under the Income-tax Act, 2025.

Select the TDS/TCS filing category.

Select Form 143.

Choose the relevant Tax Year.

Select quarter.

Select regular or correction statement.

Upload the validated file.

Complete verification.

The official user manual also states that the collector should have a valid TAN registered on the e-Filing portal and use the appropriate return preparation utility/FVU process where applicable.

Why PAN Accuracy is Critical

For automobile dealers, PAN errors are one of the most common sources of TCS credit problems.

Consider a car sale:

Invoice = ₹30 lakh

TCS = ₹30,000

If the buyer’s PAN is entered incorrectly in the TCS return, the buyer may not see the ₹30,000 credit correctly.

The buyer may then contact the dealer and request correction.

This creates:

Customer dissatisfaction;

Correction filing;

Reconciliation work;

Additional professional fees;

Potential tax-credit disputes.

Therefore, PAN validation should be performed before finalising the TCS entry, not after filing the quarterly return.

What Documents Should the Seller Maintain?

A professional automobile dealer should maintain a TCS file containing:

Buyer documents

PAN;

Aadhaar, where applicable;

Buyer category;

Government exemption documents, if applicable;

Dealer/distributor status where relevant.

Vehicle documents

Invoice;

Vehicle model;

Vehicle identification details;

Sale value;

GST details;

Discount details;

Accessories;

Other charges;

Receipt schedule.

TCS documents

TCS calculation sheet;

TCS collection entries;

Bank receipt;

Challan;

Form 143 working;

Form 143 acknowledgement;

Form 133;

Correction statements, if any.

Internal documents

TCS policy/SOP;

ERP configuration;

PAN validation report;

Monthly reconciliation;

Quarterly reconciliation.

What if Payment is Received in Multiple Instalments?

The seller must track each receipt.

Example

Vehicle value = ₹40 lakh.

Payment schedule:

Date	Receipt	TCS @ 1%
10 April	₹10 lakh	₹10,000
25 April	₹15 lakh	₹15,000
15 May	₹15 lakh	₹15,000
Total	₹40 lakh	₹40,000

The total TCS is ₹40,000.

The seller should ensure the TCS ledger and customer ledger reconcile with the actual receipts.

What if the Buyer Cancels the Vehicle?

Vehicle cancellation and refund situations require careful TCS reconciliation.

Suppose:

Vehicle value = ₹20 lakh

TCS collected = ₹20,000.

Later, the booking is cancelled.

The seller should not simply reverse the TCS ledger without considering whether the TCS has already been deposited/reported.

The appropriate treatment depends on:

Whether the amount was actually received;

Whether TCS was deposited;

Whether the TCS was included in the quarterly statement;

Whether the transaction was reversed;

Whether a correction statement is required.

Where TCS has already been reported, the seller should use the prescribed correction mechanism rather than making an informal accounting reversal only.

What if There is a Sale Return?

Sale return situations need reconciliation between:

Sales invoice;

Customer account;

TCS ledger;

Challan;

Quarterly TCS return;

Correction statement.

A dealer should not assume that every accounting credit note automatically reverses a TCS liability already reported.

The tax reporting trail should be examined separately.

TCS and Discounts

Suppose:

Original vehicle price = ₹20 lakh

Discount = ₹2 lakh

Net consideration = ₹18 lakh.

The seller should determine the applicable value/sale consideration according to the legal and invoice structure.

If the qualifying vehicle remains above the ₹10 lakh threshold, the TCS requirement can still arise.

The accounting system should therefore identify the actual contractual/invoice consideration rather than simply applying a threshold to the vehicle’s advertised MRP.

For complex dealer schemes involving manufacturer discounts, exchange bonuses, cash discounts and incentives, the tax position should be documented carefully.

Exchange of Old Vehicle – Does TCS Apply?

Exchange transactions require special attention.

Example:

New vehicle value = ₹18 lakh

Old vehicle exchange value = ₹5 lakh

Balance paid by buyer = ₹13 lakh.

The seller should not automatically conclude that TCS applies only because cash/bank receipt is ₹13 lakh.

The TCS provision relates to the sale consideration/value of the motor vehicle and the statutory receipt mechanism.

Therefore, the dealer should determine:

New vehicle sale value;

Exchange value;

Net amount payable;

Whether exchange is a separate transaction;

How the invoice is structured;

What consideration is contractually received.

This is particularly important for automobile dealerships because exchange schemes can make the invoice and settlement trail complex.

TCS on Used Cars / Second-Hand Vehicles

The law focuses on the sale of a motor vehicle and does not generally restrict the motor vehicle provision merely to new vehicles.

Therefore, a qualifying seller dealing in used/second-hand motor vehicles should not automatically assume that the TCS provision is irrelevant simply because the vehicle is pre-owned.

The seller must examine:

Whether the person is a statutory “seller”;

Whether the transaction is a qualifying sale;

Whether the value exceeds ₹10 lakh;

Whether the buyer falls within an exclusion;

Whether the retail/dealer clarification applies;

Whether another provision applies.

For second-hand vehicle businesses, the facts should be reviewed transaction by transaction.

Does TCS Apply to Electric Vehicles?

The motor vehicle provision is not restricted to internal-combustion vehicles.

Accordingly, an electric vehicle that qualifies as a motor vehicle and crosses the prescribed value threshold can fall within the provision.

There is no general exemption merely because the vehicle is electric.

Example:

Electric SUV value = ₹18 lakh

Potential TCS:

₹18 lakh × 1% = ₹18,000

subject to the applicable seller/buyer conditions.

Is TCS Applicable on Motorcycles Above ₹10 Lakh?

The provision refers to motor vehicles rather than only cars.

Therefore, a high-value motorcycle can potentially fall within the provision if it qualifies as a motor vehicle and the statutory threshold is crossed.

For example:

Motorcycle = ₹12 lakh

Potential TCS:

₹12,000

Again, the exact classification should be verified for unusual vehicle categories.

Does TCS Apply to Commercial Vehicles?

A commercial vehicle can potentially be covered because the provision is not limited to personal-use cars.

Examples may include qualifying:

Heavy vehicles;

Special-purpose vehicles;

High-value commercial vehicles;

Other motor vehicles.

However, transactions involving manufacturers, distributors, fleet operators and dealers require careful analysis because the retail-sale clarification and buyer classification may become relevant.

Is TCS Applicable if Buyer Purchases Vehicle for Business?

Yes, business use does not by itself remove the TCS requirement.

A company purchasing a high-value qualifying motor vehicle may still be required to pay TCS collected by the seller.

For example:

Company purchases car = ₹25 lakh.

TCS = ₹25,000, assuming the transaction falls within the provision.

The company can generally claim the TCS credit against its tax liability subject to correct reporting.

Is TCS Applicable to an Individual Buyer?

Yes.

The buyer being an individual does not itself create an exemption.

For example:

Individual buys car = ₹30 lakh.

TCS = ₹30,000, subject to the applicable provisions.

The buyer may subsequently claim credit for the TCS in the income-tax return.

TCS is Not the Same as GST

This distinction should be clearly communicated to customers.

GST

GST is an indirect tax on supply.

TCS

TCS under the Income-tax Act is a tax collection mechanism connected with the buyer’s income-tax credit.

Therefore:

GST ≠ TCS

A seller should show them separately in the invoice/accounting records.

How Should the Seller Show TCS in the Invoice?

A practical invoice structure can be:

Particular	Amount
Vehicle taxable value	₹15,00,000
GST	₹2,70,000
Total invoice consideration	₹17,70,000
TCS @ 1%	₹17,700
Total amount payable	₹17,87,700

The seller should ensure that the accounting system does not include TCS as sales revenue.

The TCS amount should be posted to a separate liability/collection ledger.

Suggested Accounting Entry – Seller

Suppose:

Invoice = ₹20 lakh

TCS = ₹20,000.

At sale

Customer A/c Dr. ₹20,20,000

To Sales A/c ₹20,00,000

To TCS Payable A/c ₹20,000

When payment is received:

Bank A/c Dr. ₹20,20,000

To Customer A/c ₹20,20,000

When TCS is deposited:

TCS Payable A/c Dr. ₹20,000

To Bank A/c ₹20,000

The exact accounting treatment should be aligned with the entity’s accounting system and applicable accounting policies.

What Happens if Seller Fails to Collect TCS?

Failure to collect required TCS can create significant consequences.

The Income-tax Act, 2025 contains provisions dealing with defaults in TDS/TCS collection and payment.

Under Section 398, the collector can be treated as liable for the tax that should have been collected, subject to the statutory provisions and exceptions.

This can create:

TCS demand;

Interest;

Late filing consequences;

Penalties;

Reconciliation issues;

Customer credit problems.

Therefore, TCS should be treated as a core compliance function rather than an optional accounting adjustment.

Interest for Failure to Collect TCS

Under Section 398(3)(a)(i) of the Income-tax Act, 2025, interest for failure to collect TDS/TCS is generally:

1% per month or part thereof

from the date tax was collectible to the date it is actually collected.

Example

TCS should have been collected on 10 April.

It is actually collected on 20 June.

Interest can arise for the applicable months/parts of months according to the statutory computation.

The “part of a month” rule is important and should not be ignored.

Interest for Late Deposit of TCS

If the seller collects TCS but does not deposit it on time, interest is generally:

1.5% per month or part thereof

from the date of collection to the date of actual payment.

Example

TCS collected = ₹50,000.

It should have been deposited by 7 June.

If deposited later, interest can arise at the statutory rate.

This is why the TCS payable ledger should be reconciled every month.

Late Filing of Form 143

Late filing of the quarterly TCS statement can attract a statutory late filing fee.

The applicable framework provides for a fee of:

₹200 per day

for the period of default, subject to the statutory cap.

Therefore, a dealer should separately monitor:

TCS collection;

TCS payment;

TCS return filing.

These are three different compliance checkpoints.

Can the Seller Become an “Assessee in Default”?

Yes, where required TCS is not collected or is not appropriately deposited, the seller may face proceedings under the default provisions.

The Income Tax Department states that the new Section 398 retains the framework for orders treating the deductor/collector as an assessee in default.

This makes TCS compliance especially important for large automobile dealerships where the number of transactions can be significant.

Does the Buyer Have Any Responsibility?

The primary obligation to collect TCS lies with the seller.

However, the buyer should:

Provide correct PAN;

Provide appropriate documents;

Verify TCS charged;

Verify TCS reflection in tax statements;

Obtain Form 133;

Reconcile the credit before filing the ITR.

A buyer should not assume that simply paying TCS on the invoice guarantees automatic tax credit.

Correct PAN reporting and seller compliance are essential.

TCS Reconciliation – Best Practice for Dealers

A professional dealership should perform a three-way reconciliation:

Reconciliation 1 – Sales Register vs TCS Register

Every qualifying vehicle should appear in the TCS register.

Reconciliation 2 – TCS Register vs Bank Receipts

TCS should correspond with actual customer receipts.

Reconciliation 3 – TCS Register vs Form 143

The quarterly return should agree with the internal TCS register and deposited challans.

Reconciliation 4 – Form 143 vs Buyer Credit

Customer complaints about missing TCS should be traced back to PAN and return reporting.

Suggested TCS Register Format

A dealer can maintain the following columns:

Date	Invoice No.	Buyer Name	PAN	Vehicle	Invoice Value	TCS Rate	TCS Amount	Receipt Date	Challan	Form 143

Additional fields may include:

Buyer category;

Government exemption;

Dealer/distributor flag;

GST amount;

Exchange value;

Discount;

Refund;

Correction status.

This register can substantially reduce quarterly reconciliation problems.

Practical Example – ₹12 Lakh Car

Assume:

Vehicle sale consideration = ₹12,00,000

TCS = ₹12,00,000 × 1%

= ₹12,000

Customer pays:

₹12,12,000

The seller deposits ₹12,000 with the Government and reports the transaction against the buyer’s PAN.

The buyer can subsequently claim the ₹12,000 TCS credit, subject to correct reporting.

Practical Example – ₹25 Lakh Car

Vehicle sale consideration = ₹25,00,000

TCS = 1%

= ₹25,000

Customer pays:

₹25,25,000

The ₹25,000 should be separately tracked in the seller’s TCS payable ledger.

Practical Example – ₹10 Lakh Exactly

Vehicle value = ₹10,00,000.

Since the statutory wording is “exceeding ₹10 lakh”, the specific motor vehicle TCS provision does not trigger merely because the value equals ₹10 lakh.

Therefore:

TCS under the motor vehicle high-value provision = Nil

subject to the full transaction facts and other applicable provisions.

Practical Example – ₹10,00,001

Vehicle value = ₹10,00,001.

Since the value exceeds ₹10 lakh:

TCS = ₹10,00,001 × 1%

= ₹10,000.01

In practical accounting, the applicable rounding provisions should be followed.

The key point is that crossing the threshold triggers TCS on the applicable sale consideration.

Practical Example – Two Cars

Buyer purchases:

Car A = ₹9 lakh

Car B = ₹12 lakh

Car A:

Below threshold → no TCS under the motor vehicle >₹10 lakh provision.

Car B:

Above threshold → TCS applicable.

TCS on Car B:

₹12 lakh × 1% = ₹12,000.

Practical Example – Instalment Payment

Vehicle = ₹30 lakh.

Receipt 1 = ₹8 lakh

Receipt 2 = ₹12 lakh

Receipt 3 = ₹10 lakh

TCS:

₹8 lakh × 1% = ₹8,000

₹12 lakh × 1% = ₹12,000

₹10 lakh × 1% = ₹10,000

Total = ₹30,000.

This illustrates why the seller’s receipt-level TCS process is important.

Practical Example – Company Buyer

ABC Pvt Ltd purchases a vehicle for ₹40 lakh.

TCS:

₹40 lakh × 1% = ₹40,000.

The fact that the buyer is a company does not by itself remove the TCS requirement.

The company should ensure that the TCS is correctly reflected against its PAN and subsequently claim the credit.

Practical Example – Government Buyer

A qualifying government entity purchases a vehicle.

Before collecting TCS, the seller should verify whether the buyer falls within the statutory exclusion.

If it does, TCS may not be required.

The seller should preserve supporting documentation.

Practical Example – PAN Not Furnished

Suppose:

Vehicle value = ₹20 lakh.

Normal TCS = ₹20,000.

If the buyer does not furnish valid PAN/Aadhaar, the applicable higher-rate provisions need to be examined.

The seller should not simply charge 1% without considering the PAN requirement.

Is Section 206CCA Still Applicable in 2026?

No.

This is a major update.

Section 206CCA, which imposed higher TCS rates for specified non-filers of income-tax returns, was omitted with effect from 1 April 2025.

Therefore, for current Tax Year 2026-27:

Do not apply old Section 206CCA non-filer TCS calculations.

However, PAN/Aadhaar-related higher-rate provisions remain a separate issue and should be checked independently.

What are the New 2026 Compliance Forms?

The major TCS form changes are:

Old Form	New Form	Purpose
Form 27EQ	Form 143	Quarterly TCS statement
Form 27D	Form 133	TCS certificate

The Income Tax Department has officially confirmed the replacement of Form 27EQ by Form 143.

Form 143 – Why Businesses Must Update Their Software

Dealerships using:

Tally;

ERP;

SAP;

Oracle;

Dealer Management Systems;

Custom billing software;

Tax compliance software

should ensure that the system has been updated for:

New section numbering;

New Tax Year terminology;

Form 143;

New reporting codes;

PAN validation;

New challan/reporting structure.

The Income Tax Department itself has advised taxpayers to update systems for the new Income-tax Act framework.

Tax Year 2026-27 – Important Terminology Change

Under the new Income-tax Act, 2025, terminology has also changed.

Businesses should gradually move from old terminology such as:

Previous Year;

Assessment Year

to the new framework using:

Tax Year.

This matters particularly in:

Tax reports;

ERP masters;

TCS returns;

Internal SOPs;

Client communication.

What Should Automobile Dealers Do From 2026-27?

A dealer should update its internal process as follows:

Step 1 – Create a TCS flag

Vehicle value > ₹10 lakh = automatic review.

Step 2 – Capture buyer PAN

PAN must be validated.

Step 3 – Identify buyer category

Check whether the buyer is:

Government;

Local authority;

Eligible PSU;

Dealer/distributor;

Individual;

Company;

Firm;

Other entity.

Step 4 – Calculate TCS

Apply the applicable rate.

Step 5 – Collect TCS

Collect at the statutory trigger point.

Step 6 – Deposit

Deposit within the prescribed time.

Step 7 – File Form 143

Report quarterly.

Step 8 – Issue Form 133

Provide the TCS certificate to the buyer.

Step 9 – Reconcile

Match:

Sales → Receipts → TCS → Challan → Form 143 → Form 133.

Common Mistakes in Motor Vehicle TCS

Mistake 1 – Applying TCS only on ₹10 lakh excess

Wrong.

The qualifying sale triggers TCS on the applicable sale consideration.

Mistake 2 – Thinking only luxury cars are covered

Wrong.

The law covers motor vehicles generally, subject to the conditions.

Mistake 3 – Checking annual aggregate instead of individual vehicle

Wrong.

The ₹10 lakh threshold is not an annual aggregate threshold.

Mistake 4 – Ignoring seller eligibility

Wrong.

Seller definition must be checked.

Mistake 5 – Using Form 27EQ for Tax Year 2026-27

Wrong.

Form 143 applies for the new framework.

Mistake 6 – Issuing Form 27D instead of Form 133

Wrong for current-year transactions.

Mistake 7 – Applying Section 206CCA to current transactions

Wrong.

Section 206CCA has been omitted from 1 April 2025.

Mistake 8 – Treating TCS as dealer income

Wrong.

TCS is collected on behalf of the Government.

Mistake 9 – Not validating PAN

High-risk practice.

Mistake 10 – Waiting until quarterly return filing to deposit TCS

Wrong.

Deposit and return filing are separate obligations.

TCS Compliance Checklist for Automobile Dealers

Before closing each high-value vehicle sale, verify:

Seller

• Is seller covered under Section 402(33)?
• Is preceding Tax Year turnover relevant for individual/HUF status?

Vehicle

• Is it a motor vehicle?
• Does value exceed ₹10 lakh?
• Is the threshold tested vehicle-wise?

Buyer

• Buyer PAN obtained?
• PAN validated?
• Buyer falls under any statutory exclusion?
• Dealer/distributor status checked where relevant?

Collection

• TCS rate verified?
• TCS base verified?
• TCS collected at correct time?
• TCS separately shown in accounts?

Deposit

• Monthly TCS reconciled?
• Challan generated?
• Payment made by due date?

Return

• Form 143 prepared?
• PAN details verified?
• Challan details verified?
• Quarterly statement filed?

Certificate

• Form 133 generated/issued?
• Buyer credit verified where necessary?

Monthly TCS SOP for a Car Dealer

A good internal SOP can be:

Day 1–3

Download sales and receipt data.

Day 4

Identify qualifying motor vehicle transactions.

Day 5

Verify buyer PAN.

Day 6

Prepare TCS liability.

Day 7

Deposit TCS.

Day 8–10

Reconcile challan.

Quarterly

Prepare Form 143.

After processing

Generate Form 133 and resolve mismatches.

This type of SOP reduces the risk of missed TCS transactions.

TCS Audit Trail

For every qualifying sale, a tax auditor or tax professional should be able to answer:

What vehicle was sold?

What was its value?

When was it sold?

When was payment received?

Who was the buyer?

What was the buyer’s PAN?

Was the buyer exempt?

How much TCS was collected?

When was it deposited?

Under which challan?

In which quarterly statement was it reported?

Was Form 133 issued?

If these twelve questions can be answered from the records, the seller’s TCS system is generally much stronger.

What if TCS was Not Collected Earlier?

Suppose a dealer discovers that it sold several qualifying vehicles but did not collect TCS.

The dealer should not simply ignore the issue.

The compliance team should:

Identify all affected transactions;

Determine the applicable law for the transaction date;

Calculate the TCS;

Determine interest;

Examine whether the buyer has already paid tax;

Check the statutory relief available in case of buyer’s tax payment;

Deposit/report the amount as required;

File correction statements if necessary.

The Income-tax Act contains statutory provisions dealing with cases where tax has been paid by the recipient, but the relevant conditions and documentation must be satisfied.

Transition Cases – March 2026 vs April 2026

The transition from the old Act to the new Act is particularly important.

Receipt on 31 March 2026

The old Income-tax Act, 1961 framework applies.

Receipt on 1 April 2026

The Income-tax Act, 2025 framework applies.

The Income Tax Department’s transition FAQs specifically state that TCS is governed according to the date of the triggering receipt, with amounts received on or before 31 March 2026 continuing under the old Act and amounts received on or after 1 April 2026 being governed by the new Act.

Therefore, businesses should not change the law applied merely based on invoice date.

The receipt/triggering event is critical.

Example of Transition

Invoice issued:

25 March 2026

Advance received:

30 March 2026

This receipt falls under the old framework.

Now consider:

Invoice issued:

25 March 2026

Advance received:

5 April 2026

The TCS treatment of that receipt is governed by the new framework.

Therefore, ERP systems should capture the actual receipt date, not merely invoice date.

High-Value Goods Expansion – 2025 Update

A major change to Section 206C(1F) came through Finance (No. 2) Act, 2024.

Previously, Section 206C(1F) was specifically associated with motor vehicles above ₹10 lakh.

The amendment expanded it to allow TCS on other goods above ₹10 lakh if notified by the Central Government.

CBDT Notification No. 36/2025 dated 22 April 2025 notified ten categories.

These include:

Wristwatches;

Art pieces such as antiques, paintings and sculptures;

Collectibles such as coins and stamps;

Yachts, rowing boats, canoes and helicopters;

Sunglasses;

Handbags and purses;

Pairs of shoes;

Sportswear and sports equipment;

Home theatre systems;

Horses used for horse racing or polo.

The Income Tax Department’s FAQ confirms that the new provisions became effective from 22 April 2025.

This expansion is relevant because a seller dealing with both vehicles and other notified high-value goods may have a broader TCS compliance responsibility.

Is the ₹10 Lakh Threshold Still Relevant in 2026?

Yes.

For motor vehicles, the ₹10 lakh threshold continues under Section 394.

The Income Tax Department’s current Section 394 page specifically provides for sale consideration exceeding ₹10 lakh in the case of a motor vehicle or other notified goods, with TCS at 1%.

Therefore, the 2026 transition did not remove the ₹10 lakh motor vehicle TCS requirement.

Does TCS Increase the Cost of the Vehicle?

For the buyer, TCS creates an additional cash outflow at the time of purchase.

However, because it is generally available as tax credit, it should not ordinarily be treated as a permanent additional tax cost.

For example:

Car = ₹20 lakh

TCS = ₹20,000

Buyer pays ₹20.20 lakh, but ₹20,000 becomes tax credit subject to proper reporting.

Thus, sellers should explain TCS clearly to customers to avoid misunderstandings.

How Sellers Should Communicate TCS to Customers

A dealer can mention on the invoice:

“TCS collected under the applicable provisions of the Income-tax Act. TCS amount is reported against the buyer’s PAN and may be claimed as tax credit subject to applicable law.”

This helps reduce customer disputes.

The buyer should also be informed to verify the credit in the tax statement.

Difference Between TDS and TCS

A simple distinction:

TDS

Tax is deducted by the payer from certain payments made to the recipient.

TCS

Tax is collected by the seller/collector from the buyer/collectee in specified transactions.

For motor vehicle sales:

Seller → collects TCS → deposits with Government → buyer gets credit

This is why an automobile dealer has a collection responsibility rather than a TDS deduction responsibility in the motor vehicle TCS transaction.

TCS vs GST – Quick Comparison

Particular	GST	TCS
Law	GST law	Income-tax law
Nature	Indirect tax	Tax collection mechanism
Collected by	Supplier	Seller/collector
Paid to	GST authorities	Income Tax Department
Buyer credit	ITC subject to GST rules	Income-tax credit
Rate	Depends on vehicle	1% under specified TCS provision
Return	GST returns	Form 143

TCS vs Advance Tax

TCS is not the same as advance tax, although both can ultimately affect the buyer’s tax liability.

TCS is collected by the seller.

Advance tax is paid by the taxpayer directly based on estimated tax liability.

The buyer receives TCS credit against the buyer’s tax liability.

Does TCS Affect the Seller’s Income?

No.

The seller is merely collecting tax on behalf of the Government.

Therefore, the TCS amount should generally not be treated as sales income.

The accounting should maintain a separate TCS payable/collection ledger.

Should TCS Be Included in GST Taxable Value?

Generally, TCS collected under the Income-tax Act is not itself treated as consideration for the supply merely because it is collected from the buyer.

It should therefore be separately accounted for from GST.

Professional accounting systems should maintain separate ledgers for:

Vehicle sales;

GST;

TCS payable.

Internal Controls for Large Dealerships

Large automobile dealers should implement automated controls.

Control 1

System alert if vehicle value > ₹10 lakh.

Control 2

PAN mandatory before invoice finalisation.

Control 3

TCS calculation locked.

Control 4

Government-exemption flag requires approval.

Control 5

Dealer/distributor classification requires documentation.

Control 6

TCS liability reconciled with receipts.

Control 7

Monthly deposit reminder.

Control 8

Quarterly Form 143 reconciliation.

Control 9

Form 133 generation.

Control 10

Exception report for high-value invoices where TCS = zero.

The tenth control is particularly useful.

A report showing:

Vehicles > ₹10 lakh but TCS = Nil

should be reviewed every month.

Suggested Exception Report

Invoice	Vehicle Value	Buyer Type	PAN	TCS	Reason for Nil
INV-001	₹15L	Individual	Valid	₹15,000	—
INV-002	₹18L	Govt	Valid	Nil	Exempt buyer
INV-003	₹22L	Dealer	Valid	Nil	Dealer-level transaction – review
INV-004	₹12L	Company	Valid	₹12,000	—

Every “Nil” entry should have a documented reason.

What Should a Tax Professional Verify During Review?

A CA/tax professional reviewing an automobile dealer should obtain:

Sales data

Vehicle-wise sales register;

Invoice values;

Customer PAN;

Buyer category.

Receipt data

Receipt date;

Amount;

Advance;

Balance.

TCS data

TCS ledger;

Challans;

Form 143;

Form 133.

Reconciliation

Sales register vs TCS register;

TCS register vs challan;

TCS register vs Form 143.

Exceptions

High-value sales with zero TCS;

PAN missing;

Government buyers;

Dealer buyers;

Cancellations;

Credit notes;

Exchange transactions.

Professional Compliance Matrix

Question	Correct approach
Vehicle exactly ₹10 lakh?	Generally no TCS under the “exceeding” threshold
Vehicle ₹10 lakh + ₹1?	TCS provision triggered, subject to conditions
Rate?	1%
On excess over ₹10 lakh?	No; applicable sale consideration
Per vehicle or yearly aggregate?	Per qualifying vehicle
Luxury cars only?	No
Business-use car?	Can be covered
Individual buyer?	Can be covered
Company buyer?	Can be covered
Government buyer?	Check statutory exclusion
PAN required?	Yes, for proper reporting
Old Form 27EQ in TY 2026-27?	No; Form 143
Old Form 27D?	Form 133 under new framework
Section 206CCA?	Omitted from 1 April 2025
Section 206C(1H)?	Not applicable from 1 April 2025
New Act section?	Section 394
Rate changed in 2026?	Motor vehicle TCS remains 1%

Frequently Asked Questions

Q1. What is the TCS rate on a car above ₹10 lakh?

The standard TCS rate is 1% under the applicable motor vehicle TCS provision.

Q2. Is TCS applicable on a car worth exactly ₹10 lakh?

The statutory threshold is “exceeding ₹10 lakh”, so merely reaching ₹10 lakh does not trigger the provision.

Q3. If the car costs ₹15 lakh, is TCS only on ₹5 lakh?

No.

TCS is generally calculated on the applicable sale consideration, not merely on the ₹5 lakh excess.

Q4. Is TCS applicable to luxury cars only?

No. It applies to qualifying motor vehicles generally.

Q5. Is TCS applicable on electric cars?

An electric vehicle can be covered if it qualifies as a motor vehicle and the prescribed value threshold is exceeded.

Q6. Is TCS applicable on motorcycles?

A qualifying motor vehicle can include high-value motorcycles where the statutory conditions are satisfied.

Q7. Is TCS applicable to used cars?

The provision is not restricted simply to new vehicles. The seller and transaction conditions must be checked.

Q8. Is TCS applicable to business-use vehicles?

Yes, business use by itself does not create an exemption.

Q9. Who collects TCS?

The eligible seller collects TCS from the buyer.

Q10. Who gets the TCS credit?

The buyer/collectee gets the tax credit against the buyer’s PAN, subject to correct reporting.

Q11. What is Form 143?

Form 143 is the new quarterly TCS statement under the Income-tax Act, 2025 framework. It replaces Form 27EQ from Tax Year 2026-27.

Q12. What is Form 133?

Form 133 is the new TCS certificate replacing Form 27D under the Income-tax Act, 2025 framework.

Q13. Is Section 206C(1F) still used in 2026?

For transactions governed by the Income-tax Act, 2025 from 1 April 2026, the corresponding provision is Section 394. The old Section 206C(1F) applies to transactions governed by the old Act.

Q14. Does Section 206CCA apply in 2026?

No. Section 206CCA was omitted with effect from 1 April 2025.

Q15. Does Section 206C(1H) apply in 2026?

No. Section 206C(1H) is not applicable from 1 April 2025.

Q16. Does the buyer have to pay TCS separately?

Practically, yes. The seller collects TCS from the buyer in addition to the transaction amount.

Q17. Can the buyer get a refund of TCS?

TCS is available as tax credit. If total tax credits exceed final tax liability, the excess may be refundable through the income-tax return process, subject to applicable rules.

Q18. Is TCS a permanent cost?

Generally no. It is a tax credit mechanism for the buyer.

Q19. Does payment through cheque avoid TCS?

No. The motor vehicle TCS provision is not dependent on the mode of payment.

Q20. Is TCS collected at booking?

TCS is linked to the receipt of consideration. If an advance is received for a qualifying transaction, the TCS collection requirement can arise on that receipt.

Q21. What if the customer pays in instalments?

TCS is collected proportionately as consideration is received, subject to the statutory framework.

Q22. What if PAN is incorrect?

The buyer may face a TCS credit mismatch. The seller should correct the reporting through the prescribed correction process.

Q23. What if the dealer forgot to collect TCS?

The dealer should identify the default, calculate the applicable tax and interest, and take corrective compliance action rather than ignoring it.

Q24. Does GST automatically get excluded from TCS?

There is no basis to blindly apply the TDS-on-GST rule to motor vehicle TCS. The seller should adopt a legally supportable and documented treatment.

Q25. Is TCS shown separately from GST?

Yes. For accounting and invoice clarity, TCS should be separately identified from GST.

2026 Compliance Update – What Sellers Must Remember

For Tax Year 2026-27, the most important updates are:

New Income-tax Act

The Income-tax Act, 2025 applies from 1 April 2026.

New TCS section

Motor vehicle TCS is now under Section 394.

Rate remains 1%

The motor vehicle TCS rate remains 1%.

₹10 lakh threshold continues

The threshold remains for motor vehicles exceeding ₹10 lakh.

Form 143 introduced

Form 143 replaces Form 27EQ for quarterly TCS reporting.

Form 133 introduced

Form 133 replaces Form 27D as TCS certificate.

Section 206CCA omitted

The old non-filer higher TCS regime under Section 206CCA no longer applies from 1 April 2025.

Section 206C(1H) withdrawn

General TCS on sale of goods under Section 206C(1H) is not applicable from 1 April 2025.

Monthly deposit remains critical

Do not confuse the quarterly return due date with the monthly TCS deposit deadline.

PAN accuracy is essential

Wrong PAN can cause TCS credit mismatch.

Final Compliance Checklist – One Page

Before considering a motor vehicle TCS transaction complete, the seller should ask:

Seller Check

• Is seller covered under Section 402(33)?
• Is the seller a company, firm, co-operative society or eligible individual/HUF?

Vehicle Check

• Is it a motor vehicle?
• Does its value exceed ₹10 lakh?
• Has the threshold been tested vehicle-wise?

Buyer Check

• Buyer PAN obtained?
• PAN validated?
• Buyer falls within any statutory exclusion?
• Dealer/distributor status checked?

TCS Check

• Correct TCS rate applied?
• Correct base selected?
• TCS collected at the correct receipt stage?
• TCS separately recorded?

Deposit Check

• TCS deposited within time?
• Challan reconciled?

Return Check

• Form 143 prepared?
• PAN matched?
• Amount matched?
• Challan details matched?
• Return filed within due date?

Certificate Check

• Form 133 issued?
• Buyer credit reconciled?

Records

• Invoice preserved?
• PAN proof preserved?
• Exemption proof preserved?
• Receipt records preserved?
• TCS working preserved?
• Challan preserved?
• Form 143 acknowledgement preserved?

Conclusion

TCS on the sale of motor vehicles above ₹10 lakh continues to be an important compliance requirement for eligible sellers in India.

The biggest change in 2026 is not the disappearance of the provision but the transition to the new Income-tax Act, 2025 framework.

For transactions governed by the new Act from 1 April 2026, sellers should work with the new statutory structure under Section 394, while remembering that the motor vehicle threshold remains above ₹10 lakh and the standard TCS rate remains 1%.

The seller must focus on five core areas:

Seller eligibility + Vehicle value + Buyer status + Correct TCS collection + Timely reporting

The compliance process should not stop at collecting 1% from the customer. The seller must also:

Obtain correct PAN;

Identify exempt buyers;

Track receipt dates;

Calculate TCS correctly;

Deposit TCS on time;

File Form 143;

Issue Form 133;

Maintain proper documentation;

Reconcile TCS with the buyer’s PAN.

For Tax Year 2026-27, businesses must also update their accounting and ERP systems because Form 143 has replaced Form 27EQ and Form 133 has replaced Form 27D. The Income Tax Department’s official guidance confirms the new filing framework.

At the same time, sellers should avoid carrying forward outdated provisions. In particular, Section 206C(1H) is no longer applicable from 1 April 2025, and Section 206CCA has also been omitted from 1 April 2025.

A well-designed TCS process should therefore work like this:

High-value vehicle identified → Seller eligibility checked → Buyer/PAN verified → Exemption checked → TCS calculated → TCS collected → TCS deposited → Form 143 filed → Form 133 issued → Credit reconciled

For automobile dealers handling a large number of transactions, automation and reconciliation are particularly important. A single missed TCS transaction may appear small, but repeated defaults can create substantial tax, interest and compliance exposure.

Ultimately, TCS on motor vehicles should be treated as a regular statutory compliance process rather than merely an additional invoice line.